Anthony Scaramucci’s sleazy sales pitch
Edward Robinson has a fabulous profile of Anthony Scaramucci today. Scaramucci is a master of self-promotion; in the secretive world of hedge funds, he stands out as the guy who will spend whatever it takes to get noticed.
Scaramucci uses his SALT conference — and its A-list lineup of speakers — to burnish the SkyBridge brand. At the 2011 event, Scaramucci threw a private dinner for Bush, who pocketed $175,000 for his off-the-record talk earlier in the evening…
Scaramucci promotes SkyBridge in the media too. He makes regular appearances as a stock picker on CNBC, and spent more than $100,000 to place the SkyBridge logo in a scene in Stone’s second Wall Street drama featuring Gordon Gekko, the insider- trading felon played by Michael Douglas…
When the recession struck in 2008, SkyBridge rapidly lost a fifth of its value and Scaramucci criss-crossed the country trying to persuade clients not to withdraw from his fund…
At the time, financial firms were canceling conferences in Las Vegas out of concern it would look bad to party in Sin City as taxpayers bailed out Wall Street.
Scaramucci had no such qualms. He decided to host his first hedge-fund extravaganza at Encore at Wynn, one of the priciest hotels on the Strip. “I wanted to let people know we were still alive,” he says.
What Robinson nails is the way that this is what Scaramucci does — it’s his job. Scaramucci is a fund-of-funds manager, posting returns even he admits are lackluster: he more or less tracks the S&P 500, while making big, risky bets (a third of his assets are in MBS), investing in leveraged hedge funds, and reserving the right not to redeem his clients’ money upon request. Which means that he only has two ways to make money: either find stupid people to give him their money, or else shower himself with so many conspicuous indicia of success that people just want to buy into his perceived success.
OK, make that one way to make money.
It’s far from clear that Scaramucci actually is successful, in financial terms, by Wall Street standards. He certainly spends a lot — millions of dollars — on various forms of conspicuous consumption and self-promotion. But he’s not making a lot: since he’s a fund-of-funds manager, he’s making 1.5-and-zero, rather than 2-and-20. And under the terms of his deal with Citigroup, a substantial chunk of that 1.5 goes straight to them. He has to run Skybridge, of course, with all the employee compensation, compliance costs, and the like that entails. He’s regularly writing seven-figure checks to pay for things like the Davos Tasting of ludicrously expensive wine. And of course he has to pony up charitable donations, too, so as to be able to get up in front of a well-heeled crowd to receive the Hedge Funds Care Award for Caring. (I’m not making this up.)
Scaramucci’s fake-it-till-you-make-it approach might end up working: his fund is still growing, and Robinson says that he “has become the Wall Street player he aspired to be when he first landed at Goldman some 22 years ago.” He’s living proof of what Windward Capital’s Robert Nichols is quoted saying at the end of the article: “Performance isn’t what beats a path to your door. It’s sales and marketing.”
But he’s not a stock-picker, or even, really, a hedge-fund manager: he just plays one on TV.
And he’s also dangerous:
SkyBridge, which manages $2.8 billion in assets, is aiming its funds of funds at so-called mass affluent investors. They are households with a net worth of $100,000 to $1 million not counting their primary residence…
“I want to be the Peter Lynch of the hedge-fund industry,” Scaramucci says, referring to the Fidelity Investments money manager and TV spokesman who helped popularize mutual-fund investing in the 1980s and 1990s. “I want to make hedge-fund investing approachable to the average American investor.”…
The fund of funds has a minimum threshold investment of only $25,000, and SkyBridge sells it through Morgan Stanley Smith Barney, Bank of America Corp.’s Merrill Lynch unit and other retail brokerages.
This is a really, really bad idea. Households with less than $1 million in net worth should not be investing in hedge funds; they should certainly not be paying Scaramucci 1.5% a year for the privilege of doing so. (Plus front-end “placement fees” of as much as 3%.) The problem here is that most hedge funds are not good investments, and there’s absolutely no indication whatsoever that the funds Scaramucci invests in are any exception. Would you invest your money with the kind of person who pays real money to sponsor a fictional ball in the movie Wall Street 2?
Some people would: Scaramucci does seem to be a consummate salesman.
A youthful man with wavy brown hair and matinee idol looks, Scaramucci does have a salesman’s smooth touch. He peppers his conversation with offers to perform favors — “What do you need?” — and is fond of slipping his arm around your shoulder and giving it a squeeze to make a point…
“I would make him the trustee for my estate not because he’s a brilliant investor but because he would do the right thing for my family,” says Robert Matza, a former president of Neuberger Berman and now president of GoldenTree Asset Management LP, a New York hedge fund. “I trust him.”
I’ve seen another side to Scaramucci: my post about his wine tasting was followed by a series of irate phone calls and emails from him, not only to me but also to any and every senior Thomson Reuters executive he could think of. It’s the steely competitor underneath the glad-handing exterior.
“Always invest with an Italian,” he says. It’s a joke — but it can also be read as a threat. If anybody is going to become the Peter Lynch of the hedge-fund industry, let’s hope it isn’t this popinjay. He’s the very worst of Wall Street, made flesh.
Update: I was happy to strike through the gratuitous Italian reference when Scaramucci told me he had taken offence.