Herb on TheStreet: So You Think You Wanna Run a Hedge Fund? Read This
Column.
(Here's a "smart" guy that blew out. It happens. Just wanted
to provide another context to pushedup's experiences.)
By Herb Greenberg
Senior Columnist
6/26/98 9:04 AM ET
Based on recent feature stories in Fortune and The Wall
Street Journal, every analyst, mutual fund manager and
broker is quitting his or her career to start a hedge fund. The
stories made the funds sound like a quick way to make a
fast buck -- fast big bucks -- but in the end they may turn
out to be little more than the epitome of this bull market. And
while the pay can be exceedingly good, the working
conditions can be horrible and the emotional swings, not to
mention the increasingly erratic markets, simply may not be
worth it.
Which brings us to Bob Pryt, whose BKP Partners in San
Francisco is shutting down after eight years. By way of
disclosure: I've known Bob for at least a decade. He was a
good, frequent, unnamed source to this column, referred to
only, at times, as "Trader Bob." I value him for his instincts,
his smarts and his ability to tap into the flow of the kind of
info guys like me like to know.
So when I heard Bob was shutting the doors, just as
everybody else seemed to be opening them, I thought,
"Typical Bob -- getting in before the crowd, getting out before
the crowd."
While that may very well turn out to be the case
(unfortunately, we won't know until after the fact), his
departure should be taken by every hedge fund wannabe as
a warning. Pryt, 39, knows what it's like to be hot -- so hot
that his investors included the heads of Wall Street firms,
big-time LBO-fund operators and the CEOs of major
companies. At the peak he was turning away money.
But after doing exceedingly well for 6 1/2 years, with his
returns at one point tripling the S&P 500, Pryt turned
uncharacteristically ice cold. "Basically, the strategies that
worked so well for the prior six or seven years just stopped
working," he says. "I tend to go long value types of things.
With the market running up so much, I was drawn into
smaller names. Then, simultaneously, I would short the
overall institutional names or short the market versus my
longs. Like other smart guys we read about, such as Tisch
and Biggs, we felt the market was overvalued. So I tried to
position myself accordingly. Yet the market continued to
defy gravity. And a lot of things I'd do, like visit companies
and have a research edge, haven't worked. Fundamentals
haven't mattered as much as money flows."
The hedge fund biz is always more grueling than glitz. In the
best of times, for the top operators, it's high stress and long
hours "to the exclusion of other things in your life," Pryt
says. And in California, because of the market's hours, it
can be exhausting. Pryt's day typically started at 3:45 a.m.
and lasted well into the afternoon. But the pay is more than
good enough to make it worthwhile -- until business turns
down. That's when ordinary gruel and exhaustion can
become magnified by the pressure from investors. "When
things were good, I profited dramatically alongside my
investors, because I was the fund's biggest investor with an
eight-figure investment," he says. "So, when I had a bad
year I lost alongside my investors. But it was a crushing
personal pressure."
The last straw was in April, literally during the birth of his
second child. "I was sitting at the hospital in labor and
delivery. I had one eye on my wife and the other on CNBC
watching the market. I happened to have a bad day that day.
I was depressed. It should've been a joyous moment in my
life and I wasn't happy."
Pryt says at that point he walked outside of the hospital,
said enough is enough "and I told myself, 'I need a life.'"
Considering that he gave the interview from Lake Tahoe,
while his fund is being wound down, Pryt appears to be on
his way to getting one. The question every hedge fund
manager should be asking, however, is whether Pryt has just
pulled the ultimate trade of his career by getting out while
the getting is good.
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