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Incompetence … and Incompetence Again - Incompetence (contd.) Print E-mail
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Incompetence … and Incompetence Again
Incompetence (contd.)
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Though we cannot deny the negative role of the credit crisis and its global effect on overall fund performance, the most important factor driving the particular investment fund industry down is wild incompetence. Thus, managing a single fund strategy implies a high degree of professional expertise and, without doubts, a hands-on experience in trading, derivatives, hedging models etc. In contrast, managing a fund of investment funds often implies no expertise whatsoever. Just look at the real-world examples (the real names are not mentioned due to the obvious reasons):
  • A hundred million dollar fund of funds had been effectively managing by a former police officer (over 15 years in the forces) having only a few months accounting courses as a financial degree substitution;
  • A senior fund analyst holding a Bachelor of Arts degree in music;
  • A managing director and a Chief Investment Officer of a two-billion dollar fund having a Law Degree with the majors in the civil law and philology.
We could list plenty of similar examples clearly demonstrating the devastating trend in the industry: the professional skills do not seem to be mandatory in the investment funds. No wonder, all the funds proudly managed by the mentioned people successfully collapsed in 2007-2008. Guess what happened to all these “investment experts”. Nothing bad at all. They successfully moved to other top-grade financial institutions occupying high-status positions.
One may say these examples are the extreme cases and should not be taken seriously. Well, if the assets of two-billion dollars under management are not a serious case, take a look at the senior portfolio manager job requirements posted by an institutional investor with over sixty billion under management:
Relevant Experience Required: 1-5 years experience working as a professional in fields such as finance, portfolio management, accounting, law or engineering.
So, anyone with, at least, one-year experience in whatever fields would qualify for this job, i.e. manage a hedge fund portfolio of about 2% of total assets, i.e. over a billion dollars.
What is the conclusion of the whole story? Everyone can make their own conclusion, which fully depends on which side of the table one belongs to. Our own position should be clear enough.