Monday, January 18, 2016
Why $1.5 Billion Nevsky Capital Is Shutting Down: The Full Letter
Nevsky Capital is a big name in the hedge fund community and is deciding to call it quits after 15 years. Nevsky has had Michael Jordan like numbers from investor Martin Taylor with annual returns averaging over 18% . Taylor is getting out while the market is still good and suspects that the future market may not be able to yield the same results or even close to the previous decade and a half. He has various reasons why he thinks the market will change and be more difficult in the future. 1-Is that with markets of huge nations like China and India, it dilutes an investors ability to make accurate reads on what is really happening in the global economy. 2) Nationalism that makes countries less transparent about why they are making the economic decisions they are making. 3) Because of lack of transparency-its hard to be able to recognize price fluctuations in a timely fashion-today it is happening increasingly rapidly. 4) US are not fully prepared to handle the rise in capital cost, and the article goes on to list a few others. I am curious what this ultimately means for other hedge fund managers and companies and if their outlook is similar. If so how will these companies adapt to continue to reap value profits from investments?
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While the reasons Taylor provides may be valid in some ways, I think no matter the time period there can always be some negative speculation about the future. I think what worries me most from this article isn't necessarily Taylor's concerns for the future of the economy, but rather that Nevsky Capital despite being successful, is shutting its doors. What worries me about this is that I think having a relatively large hedge fund closing alarms not only others in the industries, but I think it also makes the investing population as a whole more cautious looking forward especially if other firms were to decide to follow in Nevsky Capital's footsteps.
ReplyDeleteYeah I agree. It's seems that being able to predict the future of the macroeconomy is extremely complex. It is astounding that someone like him is able to have such large returns in a market that is constantly changing. It makes one wonder about insider information and how some people are able to be so successful. I am not accusing him of illegal acts, but it just makes one wonder how ethical all these hedge fun investors really are.
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