Question on hedge fund

An interesting correspondence on a forum today,

My comment on a post about Duquesne Capital Management Stanley Druckenmiller closing his fund.

Hedgefunds have to trade or speculate within certain parameters as desrcibed to their clients. So, if DM sees a change in behaviour, he cannot just do something different. He has to wait.

DM could be under unnecessary pressure from “investors” as they thought it is a given, sure thing that the fund will deliver. Nowadays hedge fund investors use all kinds of statistics to see if you are “not on top” of your game, etc.

At this point in his life, I can imagine if the so called “investors” pressure him, he can call it quit in their faces. =)

Someone challenged me,

Uh? You are thinking about mutual funds. Hedge funds agreements, all of them, have clauses that allow the manager to do basically anything he wants. Seriously fellow don’t ccomment on things you don’t know about.

I am invested in over a dozen hedge funds and have researched 100″ Obviously, you have never seen or read hedge fund paperwork. It’s only for sophisticated investors, would you like a cut and paste of the standard clause?

My response,

Sigh …

A law enforcement officer is given firearm, but he/she would not use it unless it is necessary because of the consequence.

Hedge fund managers are given the power to trade in any way they see fit, but, they market their funds with not just track records, but the methodologies they are using. e.g. long term trend following funds on commodities, short term index trading, etc.

When fund managers deviate a trade or multiple trades from their overall strategies, they will be questioned and the investors can pull out should the change spook them.

Running a hedge fund is a business, and should major investors pull out, there is no hedge fund left.

Sometimes we just have to question why people making a fool of themselves in public forums.

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