Editors' pick: Originally published March 21.
Kevin O'Leary, who many know from "Shark Tank" and as a contributor to CNBC, likes to draw analogies between his money and his children. During these stretches, he speaks in childlike voices, and sometimes refers to himself in the third person as "Daddy;" it's all very folksy or strange, depending on your personal perspective.
However, I grant O'Leary this, there is one thing identical about your children and your money: No one will care about either as much as you do.
This seems particularly relevant to point out now as last week saw the latest of what seems like an endless list of high-profile hedge fund manager blowups. I'm of course referring to Bill Ackman and his Valeant Pharmaceuticals position. The drama continued Monday and the story seems to get stranger or more nuanced by the day.
Valeant (VRX) traded over $200-per-share last year but was changing hands well below $30 Friday. Ackman is already on record as saying he wishes he had taken some profits before the fall, confirming that he is, in fact, human.
Ackman claims to have a plan for Valeant but those words must now ring a little shallow to his investors. Make no mistake, Ackman's reputation and some of his own personal fortune is on the line here, but the lion's-share of losses are being endured by folks you and I will never know: his investors.
One wonders how Ackman would be handling this situation if it was his money alone tied into Valeant. Ackman is also notoriously short Herbalife which hasn't exactly gone his way either. For the pleasure of dealing with these high-profile misses, Pershing Square investors enjoy the very special privilege of paying 2% of their assets right up front annually plus 20% of any gains. What an honor.
To be honest, I've never understood why anyone would agree to such onerous fees today. It's entirely possible that someone as well known as Ackman charges his investors even more in fees but the "two and 20" model is typical of many hedge funds, at least for now.