The ability to produce amazing alpha with favorable risk/reward ratio is a testament of the manager’s skill in running a hedge fund. To be consistently good at churning out positive return year after year is a challenge as a single huge loss in one year means higher return next is needed to bring the performance back to the targeted Compound Annual Growth Rate (CAGR). What then is the key determinant of the manager’s skill?
I believe Michael van Biema, a former Columbia Business School professor, who now runs Van Biema Value Partners, put it best when he said, “To us, the single most important characteristic for a manager is this absolute passion for investing.”
Below are the links and posts copied verbatim on how the managers first dabbled in investments.
Bruce Berkowitz
Fairholme's Bruce Berkowitz Is Beating Hedge Fund Managers At Their Own Game
BRUCE BERKOWITZ, LIKE SOME of the best investors on Wall Street, didn’t seem destined to become a money manager. He grew up in Chelsea, Massachusetts, a formerly industrial town just outside Boston that had slid into economic decline, and was the first in his family to go to college. His father ran a corner grocery store and was a part-time bookie; young Bruce learned the odds when he had to take over the operation for a few months after his dad had a heart attack.
Berkowitz recalls making his first investment, circa 1973, as a teenager, in a whole life insurance policy from Mutual of New York. Unlike term insurance, which pays out only upon death, whole life insurance is partly an investment in which the cash value accumulates over time tax-free. “Why I did it, I don’t know; it was less money to spend on cigarettes,” Berkowitz says. “I like to see that little table on page 72. It’s like a zero-coupon bond; the discounting is huge. It was the equivalent of going to Filene’s Basement and getting a discount.”
2) David Gerstenhaber
Tiger Cub David Gerstenhaber: The economist whose passion for markets began at age 14
In this Opalesque.TV BACKSTAGE interview, Gerstenhaber, who started trading stocks at the age of 14, explains his approach of Global Macro investing, and what gives his firm an edge in the highly competitive hedge fund industry. Argonaut Macro Partnership, LP has never never had a down year since its founding in 2000 and has averaged an annual return of 16%, including a 12.3% gain in the otherwise disastrous 2008.
3) Ray Dalio
Ray Dalio
The son of a jazz musician, Dalio began investing at age 12 when he bought shares of Northeast Airlines for $300 and tripled his money when the airlines went through a merger.
4) Steven A. Cohen
SAC Capital’s Cohen Opens Up
Mr. Cohen talked about how he got started as a trader, reading the stock tables in the daily newspaper as a child and hanging around the local brokerage firm near his house in Great Neck, N.Y. There “was something in my blood, something that I loved” about trading that has stayed with him. He had a little money to trade and began putting it at risk.
Mr. Cohen’s first stock investment? Perkin Elmer, which turned out to be a winner. He said he had ignored an alternative recommendation from his father, a garment center executive, to buy a fabric maker.
and of course I would be remiss if I leave out:
5) Warren Buffett
Warren Buffett
Buffett's interest in the stock market and investing also dated to his childhood, to the days he spent in the customers' lounge of a regional stock brokerage near the office of his father's own brokerage company. On a trip to New York City at the age of ten, he made a point to visit the New York Stock Exchange. At the age of 11, he bought three shares of Cities Service Preferred for himself, and three for his sister.
I believe Michael van Biema, a former Columbia Business School professor, who now runs Van Biema Value Partners, put it best when he said, “To us, the single most important characteristic for a manager is this absolute passion for investing.”
Below are the links and posts copied verbatim on how the managers first dabbled in investments.
Bruce Berkowitz
Fairholme's Bruce Berkowitz Is Beating Hedge Fund Managers At Their Own Game
BRUCE BERKOWITZ, LIKE SOME of the best investors on Wall Street, didn’t seem destined to become a money manager. He grew up in Chelsea, Massachusetts, a formerly industrial town just outside Boston that had slid into economic decline, and was the first in his family to go to college. His father ran a corner grocery store and was a part-time bookie; young Bruce learned the odds when he had to take over the operation for a few months after his dad had a heart attack.
Berkowitz recalls making his first investment, circa 1973, as a teenager, in a whole life insurance policy from Mutual of New York. Unlike term insurance, which pays out only upon death, whole life insurance is partly an investment in which the cash value accumulates over time tax-free. “Why I did it, I don’t know; it was less money to spend on cigarettes,” Berkowitz says. “I like to see that little table on page 72. It’s like a zero-coupon bond; the discounting is huge. It was the equivalent of going to Filene’s Basement and getting a discount.”
2) David Gerstenhaber
Tiger Cub David Gerstenhaber: The economist whose passion for markets began at age 14
In this Opalesque.TV BACKSTAGE interview, Gerstenhaber, who started trading stocks at the age of 14, explains his approach of Global Macro investing, and what gives his firm an edge in the highly competitive hedge fund industry. Argonaut Macro Partnership, LP has never never had a down year since its founding in 2000 and has averaged an annual return of 16%, including a 12.3% gain in the otherwise disastrous 2008.
3) Ray Dalio
Ray Dalio
The son of a jazz musician, Dalio began investing at age 12 when he bought shares of Northeast Airlines for $300 and tripled his money when the airlines went through a merger.
4) Steven A. Cohen
SAC Capital’s Cohen Opens Up
Mr. Cohen talked about how he got started as a trader, reading the stock tables in the daily newspaper as a child and hanging around the local brokerage firm near his house in Great Neck, N.Y. There “was something in my blood, something that I loved” about trading that has stayed with him. He had a little money to trade and began putting it at risk.
Mr. Cohen’s first stock investment? Perkin Elmer, which turned out to be a winner. He said he had ignored an alternative recommendation from his father, a garment center executive, to buy a fabric maker.
and of course I would be remiss if I leave out:
5) Warren Buffett
Warren Buffett
Buffett's interest in the stock market and investing also dated to his childhood, to the days he spent in the customers' lounge of a regional stock brokerage near the office of his father's own brokerage company. On a trip to New York City at the age of ten, he made a point to visit the New York Stock Exchange. At the age of 11, he bought three shares of Cities Service Preferred for himself, and three for his sister.
