Have superstar traders lost their magic?

The Wizard of Oz, Greg Coffey, has clicked his heels together and said there’s no place like home. He is bowing out of the London hedge fund world, retiring to his native Australia at the ripe old age of 41.

One of the city’s best-known traders, the slick-haired investor who famously left his employer, GLG Partners, in 2008 after turning down a £156m “golden handcuffs” offer to stay, is the latest superstar hedge fund manager to leave the industry this year.

Rumours have circulated that he has fallen out with the founder of his current employer, Louis Bacon of Moore Capital, but the true explanation may be that after riding high during the boom years, like some of his fellow superstar traders, he’s decided to bow out at the top. A £430m fortune probably helped his decision, but it has also been a tough few years for the married father-of-three, who was once named the second sexiest hedge fund manager in the world.

He has gone from generating around £200m of GLG’s performance fees in 2007, capping an impressive annual return of 22% since 2004 (and ultimately leading to the massive golden handshake offer) to underperforming at Moore Capital, with two smaller emerging-market funds losing 16% and 2.3% respectively.

So could Coffey’s departure mark the end of the big-name trader? Jacob Schmidt, head of analysts Schmidt Research Partners, thinks so. “I think we have reached the end of the trend of the last 10 to 12 years of relatively easy money. Up to 2008, we had a fantastic run in the hedge fund business, but since then it has become much more difficult. The guys like Coffey who have had an easy run are thinking: ‘Why do I need this?’ That’s why they are leaving.”

Mark Dampier, head of research at Hargreaves Lansdown, agrees. He says: “Investment is like fashion. One moment it’s all flashy, the next it’s not. They are all fallible and when they start to think they can walk on water, that’s usually when it all goes wrong.”

The best “hedgies” achieved exceptional returns in the build-up to the financial crash in 2008. They weren’t alone in that: it was easy to make money in the boom years. However, what set the superstar traders apart was their ability to create the myth that they were infallible, tempting investors to put them in charge of billions of dollars. (more…)

Hedge Fund Market Wizards: Covel Interviews Schwager

Jack Schwager wrote the original Market Wizards books, two of the must read, seminal books for investors and traders.

His latest is Hedge Fund Market Wizards — it is a behind-the-scenes look at the world of hedge funds, from fifteen traders who’ve consistently outperformed.

Schwager explores the differences between great traders and everyone else who thinks they can trade. Rare insights into the trading philosophy and methods employed by some of the most profitable individuals in the hedge fund business.

Mike Covel interviews Schwager, and its very interesting:

Jack Schwager:

“Five Market Wizard Lessons” 
Hedge Fund Market Wizards is ultimately a search for insights to be drawn from the most successful market practitioners. The last chapter distills the wisdom of the 15 skilled traders interviewed into 40 key market lessons. A sampling is provided below: (more…)

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