A Day in Paradise

Cameron Hight posts a list of the top mistakes that money managers make:

1. Confidence Bias- only search for information to support your thesis
2. Good Stock Paradox- as expected return decreases, firms up exposure
3. Value Trap- limited downside with no inherent upside
4. Risk/Reward- misconception that greater risk is required for higher returns
5. Dealing with Losers- must analyze losers through process, not results
6. ETF Hedge- improper use of ETFs as a hedge
7. Best Idea- must make your best idea your biggest position
8. Position Overload- better to have less positions with more positive returns

More from Cameron over at the HedgeCo.Net Hedge Fund Blogs

HedgeCo is the company I’ve worked with for the last 3 and a half years! We passed a milestone this month!

Read the full press release here.

New York, NY (PRWEB) April 30, 2008 — HedgeCo Networks LLC has received its first major outside investment from Inter-Atlantic Group, a private equity firm specializing in the financial services sector. The capital will be used by HedgeCo to expand business operations in both their New York City and West Palm Beach locations, as well as to break out into new verticals of the hedge fund industry.

“We are extremely excited that Inter-Atlantic has taken an interest in us, and are eager to take HedgeCo to the next level,” says Evan Rapoport, Managing Partner and Co-Founder of HedgeCo Networks. “The vote of confidence that they’ve instilled in us further fuels our existing drive to be the leading name in the hedge fund service industry.”

Inter-Atlantic currently invests in a handful of small to mid-size companies. The companies are chosen after a careful evaluation and determination of potential growth and market reach.

“Inter-Atlantic believes the hedge fund industry is a high growth sector with tremendous potential,” says Inter-Atlantic Managing Partner Andrew Lerner. “Rather than investing in a hedge fund itself, Inter-Atlantic chose to invest in one of the premier service providers to hedge funds. We like HedgeCo’s international reach, position as a top tier portal and recurring fee revenue model.”

About HedgeCo Networks
HedgeCo Networks manages HedgeCo.Net, the premier Hedge Fund Database and Information Portal, along with nine other websites devoted to alternative investments. With over 25,000 active members, HedgeCo.Net provides a platform for hedge fund managers, investors and service providers. HedgeCo also offers a vast array of services, including hedge fund website design, consultation, third party marketing and seeding. The company has consulted or helped to launch over 500 new hedge funds, both onshore and offshore. HedgeCo Networks was founded in 2001 by Evan Rapoport and Andrew Schneider. For more information, visit HedgeCoNetworks.com.

About Inter-Atlantic Group
Inter-Atlantic Group seeks to identify and create private equity investment opportunities throughout the broad financial services industry, one of the largest segments of the US economy. Specific sectors include financial technology, banking, insurance, asset management and service providers to the financial services industry. Typical investments range from $3 million – $10 million. Inter-Atlantic is principally focused on US and Bermuda opportunities but considers investment opportunities worldwide. For more information, visit InterAtlanticGroup.com.

As you, my regular readers know, I have a soft spot for self-published authors, and when I find an autographed advance copy of “An American Hedge Fund” written by Timothy Sykes and self-published under the “Bull Ship Press” imprint, you know I’m going to take off with it and tear through it on a lazy Saturday morning.

Tim Sykes tells his own story of how he starts off with just over $12,000 and during his years at collage turns it into over $800,000. Read the book to find out the details of how he does it. After he leaves college he creates the “Cilantro Fund” and starts looking for investors to invest in his shiny new hedge fund.

The book doesn’t go into great detail about exactly what hedge funds are, so let’s talk about that for a minute. A hedge fund is generally a limited partnership which is formed to allow investors to become limited partners with the fund manager (or an LLC formed by the manager) as the general partner. The LP is used as an investment vehicle and the gains and losses of the fund are passed directly through to the investors after the fees. Generally the manager takes a 2% management fee, and 20% off the top of all profits.

This elaborate structure is set up to avoid having to deal with the SEC and bypass the restrictions that other money management structures, such as mutual funds, have to deal with. There is a catch. Only “Accredited Investors” can invest, you can’t advertise, and before an investor can invest you need to have a pre-existing relationship (of at least six months).

Many of the established hedge funds manage well over $100 million, have a two to five year track record and a 50+ person staff, so finding accredited investors is difficult. For the Cilantro Fund and their comparatively tiny $1.1 million, finding investors and fighting to stay afloat became a substantial challenge. The second half of the book describes the downward spiral in detail.

While many of the other reviews of “An American Hedge Fund” call the book “inspirational”, I am going to go with “spirited” as by the end of the book I was more exhausted than inspired. The book is a great read, and takes you through the ups and downs of a small player in an industry where the deck is stacked in favor of the Goliaths.

Since writing the book, Timothy Sykes has closed his hedge fund and started a website which is dedicated to inform the public and cut through the secrecy that has shrouded the hedge fund industry.

If you’re interested in Hedge Funds check out this article on what a hedge fund is.

Filed for future consumption. THE SHARPE RATIO – by Bob Fulks – I should probably put this stuff in my del.icio.us… either that or start a link blog…

With all the projects we have in the works, it’s seldom we find time to work on our own projects. This morning we launched the new version of the HedgeCo Networks corporate site. It was a quick launch, and we are still waiting for a couple components and images to be completed, but at least its up there.

http://news.morningstar.com/index/indexReturn.html
http://village.albourne.com/places/data/
http://www.hedgeindex.com/hedgeindex/en/default.aspx?cy=USD
http://www.djhedgefundindexes.com/ (download available)
http://www.hedgefundresearch.com/index.php?fuse=indices
http://www.hedgefund.net/HFNRealtime/bench_index.aspx

S&P
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500/2,3,2,2,0,0,0,0,0,5,12,0,0,0,0,0.html

DJIA
http://www.djindexes.com/mdsidx/index.cfm?event=showavgIndexData

6 hours till our plane lifts off and I’m still waiting for the gravity of the step we are taking to kick in.

While the physical journey is about to start, the journey started one year ago to the day when I flew up to West Palm Beach to meet with HedgeCo for the first time. At that time I had been working with HedgeCo for over a year as a consultant on various projects, and I went to FL to try and iron out some issues with a massive internal project which we had been working on for quite a while.

As anyone who has worked remotely knows, there is nothing like working in the same office with people who you have only communicated via Skype/phone/email. I really enjoyed my initial 2 week stay, and we were able to bang out a lot of projects as well as lay the foundation for future work.

HedgeCo also offered me a full time position at the company. The position would be as the project manager of a spin-off technology branch of the company.

The standard freelance-consultant joke is “Why spend 8 hours a day working for someone else when you can spend 14 hours a day working for yourself.” Working from Germany for companies in Germany as well as on the East and West coast of the US is physically exhausting. I was working till midnight every night, and both my family life, community interaction, and social life was severely suffering. On a personal basis, I couldn’t keep it up any longer.

So, I accepted the job, and Stella and I began the long process of closing up shop, working out all our paperwork, packing our stuff and moving over to the US.

As with everything, the process of moving was far more complex and expensive then we imagined. From having to deal with mobile phone providers who refused to end your contract (eplus sucks by the way), to changing magazine subscription options, to getting Stella a greencard (which was a grueling process on its own), finding a place/car in FL, etc. All of this while trying to wrap up projects and stay on top of the projects that you are working on.

But now we finally come to the end of the German phase of this move, and I wanted to thank Stella more then anyone else for all the effort that she put into this move. She put her life on hold for the entire year, and put in most of the effort organizing and preparing everything for the move. Thank you, we couldn’t have done it without you!

So this will be my last blog entry as a resident of Germany, being in the US I probably won’t be able to hit as many of the European-based PHP conferences as I have in the past, but hopefully I will have more time to get back into the community and hope to catch as many US based conferences as I can.

See you on the other side of the pond!

The first version of this post was eaten when Y! Pipes decided to take down firefox (seemed to happen a lot when I was hovering over the sources waiting for the tooltip top pop up – FF1.5.0.9)

Y! Pipes is a cool toy. There is a lot of interesting functionality, but a lot that could still be added. My problem is the scalabilty aspects of it. It looks fairly resource intensive on the part of Y! and with every additional feature that’s added more resources would be needed. In the half hour I spent playing with my pipe, I already created a monstor that takes 4.86 seconds to generate. And if I were to do any serious (and add specific tools) then I would need even more generating power.

There are a couple extra things I would like to see right off:

1. It needs an exclusion gate, possibly as an option of the union operator, where I can select all items from feeds a-y which do not exist in feed z.
2. I had some trouble parsing some old google RSS feeds I had. I was about to yell conspiracy but I re-generated the google urls and everything worked
3. I couldn’t see how to extract/interact with information directly from a feed. I want to embed a flickr image into the description of my news article, but couldn’t figure out how that was done.

If anyone wants to clone my pipe and fix it, feel free. Anyway, I loved it… reminded me of ning, but without the code

We’ve been busting our balls on the infrastructure of our new Hedge Fund Website creation project over the last couple weeks and since we did the official launch yesterday I figured it deserved a little link love

The heart of the hedge product a niche tool for hedge fund managers to manage their investor portfolios and relations. The underlying system is currently a custom PHP/MySQL system, however we are working with WebStyle Systems to create platform using eZpublish to which we can move some of our accounts and base future products on. We will also be launching another niche product based on this platform. This is still pre-alpha development.

One interesting tool that we are using for our support is SupportSuite by Kayako. This is a great support/ticket platform, what I have been most impressed with has been the moderate use of AJAX in both the backend and frontend support interfaces. Internally we use Mantis to manage our projects.

The project is still in it’s early stages. We are working on the “flagship” hedge fund websites website and moving that away from it’s launch state. Of course we have a blog where team members will be blogging (just me so far).

Thanks for the space, I now return you to your regular programming… Oh yes, we’re looking for another designer (isn’t everyone), check out the blog if you’re interested.