Advisor Network|12/14/2011 @ 12:04PM
Hedge Fund Abuses Hurt All Investor
The reputation of the opaque and rarefied world of Wall Street hedge funds has been severely tarnished of late. .
Now we hear allegations that hedge fund managers have select, preferred customers who can move in and out of funds hassle-free while other investors remain stuck.
According to reports in this weekend’s Wall Street Journal (subscription required for full article) and The New York Times, the Securities and Exchange Commission is exploring whether Harbinger Capital Partners LLC agreed to allow some investors, including—drum roll please—the Goldman Sachs Group to cash out of their holdings while barring other clients from doing the same. Principals at Harbinger have been threatened with civil fraud charges, according to the reports.
Apparently at hedge funds like Harbinger it pays to be Goldman Sachs. You get in first, when the market and money is hot, then you get out first, just as the market is cool and turning cold. Other investors remain stuck, but who cares? You’ve turned a profit, even if it has nothing to do with investing acumen but rather rests entirely on your connections and muscle on the Street.