market folly

If at first you don't succeed, try, try again. This cliché is the root of folly on Wall Street and in the hedge fund industry in general. Perfect example: The Ospraie Fund's Dwight Anderson is set to start two new hedge funds in July. Okay, new hedge funds, what's the big deal? Well, the problem here is that Dwight Anderson lost 39% in his Ospraie Fund in 2008 and had to liquidate the fund. At its peak, Ospraie managed $3.8 billion in commodities. But if at first you don't succeed, try, try again. And, that's exactly what Anderson is set to do.

Anderson will open two new hedge funds in July of 2009, the first of which will focus on stocks of commodity and basic materials companies (The Ospraie Equity Fund). He will also open a fund focused on commodities and derivatives (The Ospraie Commodity Fund). Anderson said that he is starting these funds because he sees significant opportunities in this market, as significant as he has ever seen in his 15 years of investing. These funds will have reduced fees where investors will pay half as much as the typical hedge fund. His new funds will charge a 1% management fee and a 10% performance fee.

His Ospraie fund is named after the osprey, a marine bird of prey. Ironically enough, his fund was the one being preyed upon in 2008. The volatile year of 2008 goes to show that anyone, regardless of their background can be humbled by Ms. Market. Anderson had previously worked at Julian Robertson's Tiger Management. While we never covered Anderson on the blog, we did cover numerous other successful Tiger Cub hedge fund managers. Anderson then went to work for global macro giant Paul Tudor Jones' Tudor Investment Corp. Contrary to Anderson, Tudor has made it through this crisis largely unscathed. Scoreboard: Master 1, Apprentice 0.

Anderson started Ospraie while at Tudor and then eventually spun it off where he saw 15% annual gains from 2000 until 2007. But, even after working and learning from some of the best in the game, Anderson still got hit... hard. Interestingly enough, we see that another fund has recently spun out of Tudor Investment Corp: James Pallotta's Raptor Capital. We just started covering Raptor in our hedge fund tracking series and only time will tell if they can avoid the fate suffered by Ospraie's prior Tudor spin-off. In an unrelated note: what's up with all the funds coming out of Tudor being named after animals of prey? We found that interesting, as everyone wants to be 'the hunter.' It's just highly ironic when you become the one being hunted.

To conclude, we rejoin our market fairytale. In typical Wall Street fashion, Anderson closed his old fund and brought two new funds to the surface. When will this pitiful cycle end? It amazes us that managers are continually given money after blowing up. But, that's Wall Street and that's the hedge fund industry; folly at its best. If at first you don't succeed, try, try again. Sigh.