Archive - Sep 23, 2009 - Blog entry

In the environment we're heading into, I prefer liquid asset classes over illiquid ones and I certainly would pick and choose my private equity and real estate funds more carefully instead of writing big checks to every large buyout fund. I'd make sure that my private equity managers are not glorified financial engineers who came from an investment banking background, but guys and gals with solid hands on experience restructuring companies from the bottom-up.

You may recall that the crude spread gap opened just a few weeks after Lehman Brothers failed and AIG required a capital infusion. During the super contago phase of late 2008 and early 2009, the spread was so ridiculously wide that the rate of return was close to 70% at one point of time.
Those few who had a role in taking advantage of the super contango ended up boosting the spot oil price back to a more normal relationship to the outer months.