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Technology Stocks : For Hedge Fund Analysts and Managers -- Ignore unavailable to you. Want to Upgrade?

To: Beltropolis Boy who wrote (233)	8/31/2000 4:59:16 PM
From: Wizard	Respond to of 499

Well its the compounding factor and a good reason why leveraged on the short side is not a good strategy. Since the Nasdaq surged early in the year, the fund got killed and got so far behind that any move down means the fund has to put on significanly more than 2x leverage or else it won't catch back up. Its the power of compounding in reverse. A good similar story is that a SF based hedge fund called St Geme Partners lost 78% of its assets in Q200. Using a leveraged long internet portfolio strategy, he put up big numbers for about 24 months (all perf #'s have been listed in Barron's). Tough to come back from down 78%. My math indicates you would have to already have been up 355% going into Q2 in order to exit Q2 with your original investment. While I think he actually did have such numbers, its likely that assets flowed in after the performance happened so that he has net net, lost money.