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Money managers under the microscope

Isabella of Castile – the hedge fund manager

September 25, 2009

Isabella of Castile was a controversial woman.  A woman who made history for herself and her country. She has been called saint and a tyrant, but never before a hedge fund manager.

rtr25v16Fred Fruitman, managing director of Loeb Partners Corp.,  the family office that oversees the Loeb family fortune, took care to bridge that gap.

He told delegates of the Asset Allocation Summit Europe 2009  this week that Isabella, a Renaissance woman, could have taught XXI century hedge funds a thing or two.
An eye for opportunity, drive for returns, and a controversial reputation were also a trade-mark for both Isabella and hedge fund managers.

Take Isabella; a woman of self-belief and vision. Or, a fanatic who did not rest until she chased all the Moors out of Spain, took their riches and created the framework for the Spanish Inquisition.

That’s Isabella, depending who you are talking to.

Despite being described by some as parasites, hedge funds have been also credited for exploiting the inefficiencies of the financial system and — in so doing helping it tick along.

Unlike Isabella they did not discover continents or invade countries, but some say some countries have been left wobbly after hedge funds had finished with their currencies.

There was one thing, however, that Isabella did better than the men in open-necked shirts: enter Christopher Columbus. Isabella gave him three (or some say even four) ships, a motley crew which apparently included a few jail birds as well as sailors — and a fairly modest sum of money for the first who would set eye to the what they thought was India and turned out to be America instead.

What seemed a hazardous investment turned out to be rather low-risk one which eventually yielded high returns. You may argue that with hindsight everybody could be infallible.

But look it from Isabella’s point of view. What could she have lost? An Italian sailor who said –  against her beloved Scriptures — that the world was round, a small number of puny ships and a motley crew.

What could she have won? If Columbus was right: lands with immense riches, increased political influence, a quicker trade and communication route to far lands. And without even the slightest need for leveraging. The rest, as they say, is history

The moral of the story; hedge funds are there for capital preservation. Take small risk for what looks like something that will give you high rewards. No leverage, no complex structures, no use of instruments nobody can value. If in doubt, think: “Would Isabella of Castile have invested?”

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