What you get for your 2 and 30

So lets say you are insanely well connected, insanely rich or insanely lucky. You may be able to invest some of your money with a big hedge fund like ESL- Eddie Lampert's highly regarded fund.

So lets say you are insanely well connected, insanely rich or insanely lucky.  You may be able to invest some of your money with a big hedge fund like ESL- Eddie Lampert's highly regarded fund.  These funds- will usually charge between 2 and 2.5% of your capital as an annual fee. In addition, they will take between 20 and 50% of the profits for their coffers.
What do you get for these huge fees?  Lampert has only a handful of stocks in his fund.  Right now- according to a recent filing- he owns SHLD (sears- down almost 30% this year) , MOT (Motorola down 20% this year), AZO ( Autozone down about 18% since January 1), and AN (Autonation- a real standout- down only 10% this year).  He added C during the second quarter  (citigroup is down 20% from the lowest price it traded at during the second quarter.

So you don't end up owning a diversified portfolio, or one that is truly hedged.  Just a handful of bad stocks- which if you were stupid you could buy on the open market.

All hail this legend of the financial world.

Joshua Avram
Joshua Avram: MD, Wash U; BS, Yale. A noted cardiologist, the doctor applies his medical knowledge to his investing in large pharm and biotechs. The doctor has correctly predicted several very exciting biotech acquisitions over the past several years, including the acquisitions of Esperion (Pfizer), Amylin (Bristol Myers) and Imclone (Bristol Myers). The doctor is presently long Novo Nord

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Comments

  • Nelle

    August 18, 2007

    Wow! That's amazing! How did they do over a longer period of time? You know, they have been around since 1988.

  • WPickering

    August 18, 2007

    How does it work with the 2 and 30? They take 2% of your principal and then 30% of your gains?

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