Red Sox Owner's Fund Gets Bloodied

The firm's letters to the clients blame the market for not following trends, or for ignoring long-term economic fundamentals. This is an unlucky gambler blaming the cards, and the mass desertions show many clients have run out of patience.

Henry's astonishing fall from grace raises two thoughts.

First: Today's hedge fund kings justify their ridiculous incomes by arguing that if they don't perform, they don't get paid. But it's not quite true. These managers get 20% of the profits when times are good, but they don't then give that money back when times are tough.

A fascinating chart on Henry's Web site shows that, thanks to recent catastrophic losses, anyone who jumped into his main fund when it launched in 1996 and stuck with it until today has actually done worse than they would have in a fund that merely tracked the S&P, international stocks. Even 30-year government bonds fared better. Overall, they've done worse than a cheap index fund.

Henry collected huge fees from them early on. He has, of course, not returned that cash today. Indeed, while the clients' losses mounted last year he was out investing in a Nascar team.

The second thought is just how evanescent most hedge funds will be. Investors will find, so often, that there is no magic investment bullet. Today's superstars like to give their funds extravagant names, like "Raptor" or "Jolly Roger." I am not aware of any called Ozymandias, which seems a shame. Hail the fast money boys -- the kings of kings.

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