Activist Funds In Momo Clothing (And Soon To Be, Returns)

Tyler Durden's picture

Ah, memory. It enjoys playing such tricks on investors as making them believe they can make money by chasing flawed strategies, over and over. Three years ago, it was activism (via UBS Activist Partners, LLC and other unsightly mechanisms), now it is momos. Alas, just as the case in question indicated that UBS clients and their money were soon parted, we now start the clock on how long it is before the brilliantly executing yet totally speculative and completely fundamentally unjustified, momentum chasing strategies collapse in flames that will easily rival if not surpass the Activist pyre.

As a reminder, 3 years ago UBS was gung-ho on getting its clients who had no clue what to do with their excess cash, into such "stellar" funds as:

  • Cevian
  • Chapman Capital
  • Harbinger
  • Icahn
  • Pardus
  • Pershing Square
  • Steel Partners
  • Children's Investment Fund

Maybe it is time for a follow up presentation from UBS, disclosing the massive losses that any investors who were foolish enough to throw their money at UBS Activist Partners, LLC have suffered since 2006. Then take that, multiply by 2, and that's where momo fund returns will be by September 2011.


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Anonymous's picture

Try to scroll down in the Appendix and take a closer look at how they calculate the performance of the individual funds. They take a snap-shot of their performance (ranging from few months to a few years). Besides they magically stop showing performance of the funds after October 2006.

I somehow feel that this should be illegal. However those stupid enough to invest in these funds should know better or else it is about time to learn a lesson from the markets.

Anonymous's picture

Are you questioning AIMA Performance Reporting standards?

. . .'s picture

I somehow feel that this should be illegal. However those stupid enough to invest in these funds should know better or else it is about time to learn a lesson from the markets.


Not so fast.  If momo trading can recapitalize the banks at the expense of dumb money, it is basically an efficient and effective tax on stupidity.  If we are stuck recapitalizing the banks because politicians don't have the balls to let them fail, I'd rather do it with a tax on stupidity than with inflation or a tax on anything else.

ZerOhead's picture

Economic Darwinism for those with over $10MM to invest... hmmm let me think...

I love it! ... And since they do not include your house in the $10 MM... compassionate as well.

Anonymous's picture

pure P.T. Barnum!

The business of telling HNW individuals and institutions that you are NOT dazzled by shiny objects, when in fact you are remains a financial services business model that has yet to be eradicated from the business landscape.

putbuyer's picture

It's amazing how these investors keep running

through the rye.

Anonymous's picture



"Anyway, I keep picturing all these little kids playing some game in this big field of rye and all. Thousands of little kids, and nobody's around - nobody big, I mean - except me. And I'm standing on the edge of some crazy cliff. What I have to do, I have to catch everybody if they start to go over the cliff - I mean if they're running and they don't look where they're going I have to come out from somewhere and catch them. That's all I do all day. I'd just be the catcher in the rye and all. I know it's crazy, but that's the only thing I'd really like to be."

Sometimes ya just gotta let em fall or they will never learn.

AN0NYM0US's picture

some info on Pershing Square

and this which lists their holding


and a list of best and worst performing Hedge Funds in 2009


and this headline:


2009 Hedge Fund Returns
First Half 2009 Hedge Fund Returns are 10-Year Best


Anonymous's picture

momentum chasing morons are like the investment trusts in the late 1920's. Leverage ponzi schemes designed for quick hit and run profits by those who run the funds with general public absorbing all the risks and loses when it blows up.

I'm F-ing sick of it all. I'd quit the business if could.

SteveNYC's picture

This goes into my "Top 10 Laugh" bucket for the Labor Day weekend. It sure has been a beauty!!

I remember UBS shopping this GARBAGE a few years back. UBS are swine, getting what they deserve.

Anonymous's picture

Telegraph Economics Headline Today:

"Barack Obama accused of making 'Depression' mistakes
Barack Obama is committing the same mistakes made by policymakers during the Great Depression, according to a new study endorsed by Nobel laureate James Buchanan. "

dcosby7's picture

Sadly 1988 is now considered vintage. This "vintage" interview with Ron Paul remains exceedingly timely.  The program starts with a piece on the Regan/Bush "October Suprises" that still haven't been covered by the major media outlets.

Anonymous's picture

"new currency needed to fix broken confidence game"

Wish I could make this shit up.

Anonymous's picture

I would like to see something written by TD about the new plan to make retirement contribution automatic instead of looked for by individuals. Knowing how people are careless about their finances,most probably the contribution is going to increase,and go to mutual fund run by the usual incompetent managers who are usually sitting ducks when the next implosion time comes. So this way, the theater will be set for more money to be transferred.

Missing_Link's picture

Can someone kindly explain to me exactly why you believe that momentum chasing is doomed to failure?  All I see in the original post and the follow-up comments are scorn.  I would love to understand why such scorn is warranted.

Perhaps I'm a noob, but I don't understand the difference between momentum-chasing and high-frequency trading, the latter of which seems to have done quite well for many.

If intelligent speculation is such a bad strategy, why is Goldman Sachs doing so well?  Yeah, OK, they're cheating like bandits with flash trading and Sigma X, but still -- explain how this is so different from what's helped make Goldman so successful.

I'm not arguing a position here, only asking for explanation.

I need more cowbell's picture

I'll take a stab at it. The current market is rigged, it is a rigged casino, where tried and true fundamental and/or technical analysis is rendered if not useless close to it. There are those who want to see the markets return to a more normal state, with only a modicum of corruption, illegal insider gaming, etc. You know , the old days.

It would be nice to P/E's in double digits once again, and not having every buyside trade rely on finding a greater fool. 

Believe it or not, market activity was for the most part truly investing, not speculation- there is/was an an actual difference.

Missing_Link's picture

Well, yes, I don't doubt that fundamentals and old-school technical trading have both been rendered useless.

But if the market has been taken over by speculative algorithms and quantitative trading, why does it follow that speculative algorithms and quantitative trading can't work?

It seems to me that it only fails if:

-Too many players use the exact same algorithm.  Given how many algorithms are out there and how little sharing there generally is, this is extremely unlikely to happen.

-The algorithms push the market too far in one direction for too long.  Also extremely unlikely to happen.


Seriously, folks.  I just need ONE GOOD ARGUMENT as to why momentum trading is doomed to failure.  Or if it is doomed to failure, tell me when, and why I shouldn't use momentum trading up to that point.

orange juice's picture

Okay; momentum trading relies on an unrealistic set of valuations or better put no set of valuations.  That's to say, it's great on the way up but has a tendency to quickly overvalue assets and result in momentum based meltdowns.  Now if you don't mind being suceptible to massive gyrations in the total value of your portfolio then it's fine, but the truth is most people don't have the capital or the means to participate in the market in this fashion and end up being stuck two steps behind the momentum and HFT's.


We can get into the advantages or disadvantages this offers institutions and retail buyers/sellers but at the end of the day it can't work because of the temporary nature momentum entails.  All of this predicates a lot of intra day volatitliy which is percursor to a crash, if a stock with a market cap of (for examples sake) 10 billion can be pushed up or down 10,15,25 percent in a day with less than 100m dollars you've got a game of hot potato and nothing more.


You say algo's can't push the market too far in one direction, is that not the principle of momentum? To keep pushing further and further... let em rip!  It's not unlikely look at how quickly momentum trading pushed the marketplace down back in Oct., that wasn't just a recalculation of stock valuations based on future conditions, it was a lot of momentum and here we are gunning in the other direction.


Bottom line, momentum and HFT distort reality in such a way that real valuations are obscured but to a few traders who know which stocks will be gunned up/down and which ones won't.  This puts a large percentage of the population at a significant disadvantage when trying to plan for retirement or map out a useful 401k, IRA, pension plan etc.

Missing_Link's picture

> momentum trading relies on an unrealistic set of valuations or better put no set of valuations

Yes, but the current market doesn't care, does it?  If the market doesn't care, why should I?  If I keep telling the market it should care and it doesn't, I'm tilting at windmills.


> but the truth is most people don't have the capital or the means to participate in the market

> in this fashion and end up being stuck two steps behind the momentum and HFT'

Yes, but again, the question is about high-frequency trading and momentum chasing, not ordinary people.

I am just such an investor who found himself at the sharp end of the algo's.  I decided that if you can't beat 'em, join 'em, and am now doing HFT myself.


> You say algo's can't push the market too far in one direction, is that not the principle of momentum?

Not saying they can't, just that they're unlikely to do so for too long.  They run out of steam on the upside and have to chase the downside for a while.


> This puts a large percentage of the population at a significant disadvantage when

> trying to plan for retirement or map out a useful 401k, IRA, pension plan etc.

I couldn't agree more.  But again, that's not the argument.  The question is not whether momo trading and HFT are moral and ethical and available to the common investor, but whether they can work sustainably.

Careless Whisper's picture

Momentum trading works very profitably if: 1) you have the discipline to follow your trading rules. 2) You stay glued to your computer. 3) You don't hold over-night positions.


Ben_the_Bald's picture

Right, because momentum can take you up or down when you are not looking. Nothing new here.

Anonymous's picture

And value or growth investing can't?

Ben_the_Bald's picture

What does the word momentum mean?

Anonymous's picture

"if you can't beat 'em, join 'em"

A nifty piece of indoctrination from our childhood.

Makes sure that if we are clever enough to see through the status quo that we aren't stupid enough to try to change it.

You know, why ruin it for everyone, now that you have gotten yourself admission to the game!

Of course, we should just keep trying to beat 'em, but when they have indoctrinated you since age 4 the odds are slightly stacked against you.

Missing_Link's picture

You're right, Anonymous.  Why should I bother trying to make money?  That surely won't help me effect change.

Instead, I should lose every penny I own so I can end up living in a cardboard box on the streetcorner with my family, and be reduced to giving oral sex in the Olive Garden bathroom to get enough money for food, so that I can righteously shake my fist in the air at Wall Street, satisfied with knowing that although my children wear clothing made out of cardboard, I've done what's morally right and proper.

Ghettomedic's picture

I have met many a self-righteous homeless person who, without a pot to piss in, will tell me how lucky they are to not be beholden to the Man. Of course, they mention nothing about how they are in fact beholden to ringworm and the 4 seasons. But, from atop their steaming sewer grate, they can proclaim victory.

orange juice's picture

Oh and why you shouldn't use it up to that point? well unless you know exactly where that 'point is' your ass can get wiped out if you aren't in front of your terminal when it happens.  look at the sugar market friday, if you bought a contract at  roughly 850, by 855 you would be getting a margin call.  And this is a market that has severe fundamental problems, missing production, supply side issues and the market is being gunned up and down 10% in a few days.

Missing_Link's picture

> well unless you know exactly where that 'point is' your ass can get wiped out if you

> aren't in front of your terminal when it happens.


Don't price patterns usually signal ahead of time before such wipeouts occur, and don't trailing stops and other kinds of stop limits usually mitigate the damage from wipeouts?

Particularly if you trade on a short time frame (less than a day), you're likely to get out safely unless the entire market has a sudden heart attack in the middle of the day.

Again, I'm specifically referring to algorithmic trading.  Such trading generally does not require you to be in front of your terminal at all.

orange juice's picture

That's why I used sugar as my example, at 850et everything was fine, then at pit sell order of 12k contracts pushed the market down, electronic trading didn't stand a chance, and in fact if you review minute by minute the next electronic price came through nearly 100 ticks away.  So much for stop or a stop limit order.  It's a scenario that doesn't happen often but when it does it totally wipes out your system and you can't do anything about it.

orange juice's picture

I should also add it depends on the exchange too, ICE won't honor stop limit orders if a price gaps outside the order, it's then regarded as broker rejected. ICE doesn't have stop orders only stop limits.


Let me also say if you want to do it, by all means go for it. I just don't think that it adds anything useful to the marketplace and instead magnifies flaws of most traders most of the time. Personally it's not how I care to spend my time, that said I do spend a fair amount of time glued to a screen regardless.

Anonymous's picture

Momentum trading works if you pay extremely close attention to the markets. But a fund with other people's money run by young graduates working 9 to 5 and hitting the bars each night - not the same care and focus.

Plus the current manipulation will see these funds as fodder for their games.

Anonymous's picture

I'm no expert, but I've come to believe that HFT and momos require market volatility to be effective. Major traders in fact trigger and amplify volatility for the sole purpose of milking the cream of that disturbance as profit.

The good.
- It's the next big profit bandwagon to jump on.
- For now, the too-big-to-fail crowd are profiting.

The bad
- Planned volatility for the sole purpose of profit.
- Volatility is historically a precursor of failure, not recovery.
- Small investors, pensions, etc. can't react quickly enough so they largely pay the cost in lowered absolute returns.
- It's destroyed the connection between price and value in the market. Paul Wilmott would suggest investors to bet on large market swings, volatility.

The ugly
- A major foundation of classic capitalism is subverted.
- The market is no longer satisfactory for the average 50 million citizens who would invest their dollars and pennies into nation building capital growth enterprises.
- Valid capital enterprise is probably at higher risk.
- My guess is that Anne Rand would disapprove of it.

Missing_Link's picture

Yes, and the more folks use momo trading, the more volatility there is, and the more effective momo trading becomes.  So it actually becomes a positive feedback loop.  In the long run, I'm concerned about explosion of volatility if momentum trading becomes too successful.

I agree that Ayn Rand would disapprove.  It really shows what capitalism has become -- a perfectly capable individual who could be holding a good job and contributing something positive to society, forced to adopt HFT, simply because there's no way for me to succeed in the market without it.

Assetman's picture

The momo stuff simply work until it doesn't.

My sense is that if you can understand the dynamics, are confident enough that your risk control works, and you don't mind risking capital... well, go for it.

Momo strategies have worked in the past... no doubt about that.  Those strategies have unwound very quickly, too.  The difference I see this time is the influence/concentration of HFT.  Perhaps the heat mapping will allow for greater opportunity.  Or perhaps, there will be a greater possibility of investors holding the bag.

This seems like one of those markets there is always someone (with volume) who knows a whole lot more than I do.  I could chase everytime someone else pushes the heat map button, but I'm not confident I can turn out ahead consistently.

I'll stick with what I understand... and realize I cannot play this game right now.

Anonymous's picture

the market has always been a 'greater fool' game. if you don't want to play that then buy fixed income instruments.

. . .'s picture

If you are sophisticated enough to bet on the relative speed of stocks, momo might be for you.  If you aren't that sophisticated, you are basically playing chicken with the market; everyone thinks they are smart enough to sell before everyone else, but most people don't. 

Careless Whisper's picture

Anyone have the returns on these funds since 2006? Would love to see them, please post if you have them. Thanks.

AN0NYM0US's picture

Perhsing Square up to December 31, 2008


and for h1 2009

Pershing Square's main fund was up 0.2% for the month of May 2009 and was up 1.2% for the month of June. They are now up 10.5% net year to date for 2009. In terms of positions that are each larger than 0.5% of the portfolio, they have 9 longs and 3 shorts. Additionally, they have around $900 million of notional exposure to credit default swaps. On a relative basis, Pershing escaped 2008 without too much of a dent. Their funds beat the indexes, but still lost money, as they were down around 11-13%, depending on the fund.

Careless Whisper's picture

Thanks Anon. Very slick annual report there. Looks like something from Guthy-Renker.

ZerOhead's picture

America in Jeopardy

ZerO: Alex I'll take American Proctology for $1000

Alex: The answer is... Pound your anus full of broken glass.

ZerO: Ummm... tough one Alex... uh... What is how do you circumcize an investment banker?

Alex: We'll accept that answer!


The Economic Recovery Team

Larry,Timmy and Ben...

Anonymous's picture


ZerOhead's picture

Thanks... I think you were the only one who got it...

Cheeky Bastard's picture

WTF is going on ZH ? Where are you ?

ZerOhead's picture

Was it anus or proctology?

ZerOhead's picture

Sorry didn't get the LOLWUT code Cheeky...

I'm kinda slow sometimes...

Jeopardy is an American game show where the host gives you the answer first and you must create the question phrased in a question...

(Simply said... these guy are fucking us up the ass so they get circumcized in the process!)

Read it again!

Cheeky Bastard's picture

i took me a while to get the joke; but then i ROFLMAO'd.

Anonymous's picture

Come on CB, give 'em a break. If anyone can understand disappearing for a few days it's certainly you.