To the pantheon including subprime shorter John Paulson and Amaranth vanquisher
John Arnold we should probably now add Santa Monica hedge fund manager Andrew
Lahde. Lahde almost certainly hasn’t reached the billion-dollar-a-year club,
but he does now officially oversee a fund – the poetically named US Residential
Real Estate Hedge V Class A – which is up
1000% year-to-date.
Lahde’s still very bearish on both housing (he has a new fund to short commercial
real estate) and on the economy more generally (he’s predicting a deep recession).
But it seems he thinks the bloodletting in residential real-estate might be
over: he’s returning money to his investors, telling them “the risk/return
characteristics are far less attractive than in the past”.
In a way, given the sheer number of hedge funds out there, and the increasing
amounts of leverage they employ, it’s a little surprising there aren’t more
funds which return 1000% in a year – and it’s actually quite reassuring
that such things are still rare. To have one enormously successful year, like
Lahde or Paulson or Lahde, can make a man dynastically wealthy. But it doesn’t
make him an investing great like Buffett or Swensen or Lynch. Remember that
during the housing bubble people were regularly making 1000% returns on their
own money by buying and flipping condos with little or no money down. In a way
it’s only just that now a few hedge fund managers are making equally large returns
by making bets in the opposite direction.