Comments on: Why insider dealing is so attractive to hedge funds http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Danny_Black http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-28100 Fri, 01 Jul 2011 11:03:29 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-28100 The only insider trade I am aware of that made serious coin was when the government let Ivan Boesky liquidate his holdings before announcing he was going to prison.

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-28099 Fri, 01 Jul 2011 11:00:56 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-28099 TinyTim1, so your argument is that people flocked to Galleon because it made 22% instead of more than 21.15%?

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-28098 Fri, 01 Jul 2011 10:42:52 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-28098 wasn’t just based on phone taps

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-28097 Fri, 01 Jul 2011 10:42:26 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-28097 If you read the prosecution it wasn’t based on phone taps. Thats how they got people to talk. It was based on IM messages, data on hard drives and testimony.

I was being kind when i said the upper bound on the amount going directly into his pocket was 60mn, because if you are talking about him getting 2 and 20 on the amount in the fund and the incremental bump to his funds performance vs the incremental bump to his personal funds then the figures look worse for you. He was running a 7bn dollar fund so 60mn more is a bump of less than 1%. His 2 and 20 take home would be 13mn, not 60mn.

I think you fundamentally misunderstood my point. I was not attempting to clear this guy, who is a proven crook. You were originally claiming that insider trading was endemic, a claim which is untrue. Not because people in the business are cuddly but because there simply is not enough money to be made to make it worth while. Firstly, there tends not to be many surprises in publically traded companies because most of the info is public and they have huge teams of people whose job it is to make sure there are no surprises. Secondly, even if you did have that information it is not trivially obvious how the market is going to react to it. Finally, most people trade in an information insensitive manner. The majority of asset managers are either index funds or quasi-index funds and then you have people trading off technical factors. So take the tiny percentage of people doing fundamental investing and take the percentage of cases where there are shocks to the market and it should be obvious that insider trading simply does not play a big factor in the market.

I will offer an alternative explanation for why this guy did this and that is simply he didn’t like to be wrong and liked the aura of being omniscient.

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By: bentwing60 http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-28048 Thu, 30 Jun 2011 04:01:49 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-28048 But you don’t understand the mentality of the rich. The first million you have arrived, the second million you are set and all the rest you are keeping score! George Soros is wealthy beyond all imagination and yet he will bring down the country to add to his wealth and control of a failing system regardless of the conquences to the average American!

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-28002 Wed, 29 Jun 2011 03:10:20 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-28002 Great post Felix,

Spot on… a few years of great performance numbers in the early going are worth a huge multiple of the actual money made on the trades themselves because the good numbers draw in investors like a magnet.

The real question is why on earth did Raj continue with the shady tactics. Once you’ve got a billion bucks of your very own NOTHING is worth the risk of spending one night in the slammer.

Raj wasen’t the first screwball to roll the dice when he didn’t have to. I can totally understand why a marginal baseball player like David Ortiz (who hit .234 the season he was age 25) takes steroids to turn himself into an allstar and make a 100 mil. What I can’t for the life of me figure out is why a serial allstar like Bonds who was already well along in the process of earning his 100 million and a trip to the Hall of Fame would decide that he wanted to taint all his achivements for an extra 150 homers and an extra 50 million.

Someone close to Raj or Bonds should have told them about the theory of deminishing returns. Your first million is a real big deal, your 10th million is still pretty helpful, your 101st million dosen’t change much at all.

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By: bentwing60 http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-27982 Tue, 28 Jun 2011 00:40:54 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-27982 The comment by jbernar is the most accurate and sentient I have read on this oft visited web site. It describes to a T the code of conduct inherent in the Wall Street and D.C. population. My only lament is that most of them will not see it, those who do will be convinced it does not apply to them, and the rest of the population, in their eyes, is not of sufficient status to halt it.

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By: TinyTim1 http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-27963 Mon, 27 Jun 2011 16:07:46 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-27963 Where’s my hat-tip? ;)

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By: jbernar http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-27961 Mon, 27 Jun 2011 15:31:56 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-27961 Without knowing the ins and outs of Wall St. trading, I think you are right. It is not really the magnitude — or lack of — that counts when someone’s malfeasance is exposed.

There is a comparison with politicians’ sex scandals. The normal response tends to be: “Why jeopardize so much for so little?” The probable explanation is that there is a pattern of private conduct that was manifested long before its effects bore such public consequences.

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By: jfruh http://blogs.reuters.com/felix-salmon/2011/06/27/why-insider-dealing-is-so-attractive-to-hedge-funds/comment-page-1/#comment-27958 Mon, 27 Jun 2011 14:33:03 +0000 http://blogs.reuters.com/felix-salmon/?p=8791#comment-27958 Finally read this NY Times article this past weekend, and what struck me is that a lot of institutions that manage and manipulate private capital can become (and perhaps are really all about?) using social networks to exploit information that is illegal to exploit. It’s no accident that most of the players in the Rajaratnam saga were from the Indian subcontinent — not that Indians are inherently corrupt, of course, but just that this particular social network (and of course there are many others that we don’t know about, originally formed in business schools, fraternities, pickup basketball leagues, whatever) formed in the first place out of Indian immigrants who worked in the finance and tech industry. Rajaratnam was able to see that there was a lot of profitable information in the network and he exploited it.

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