If most hedge fund end-of-year letters that arrived in investor mailboxes in January and February had a common stay-the-course-in-the-face-of-harsh-losses theme, most also shared another trait: They could have used some editing.
“They think more is better — and the worse the year, the bigger the letter gets,” observes Helenmarie Rodgers, head of business development at Prisma Capital Partners, a $4 billion fund of hedge funds in New York.
Ray Dalio, manager of Bridgewater Associates in Westport, Connecticut, uses part of his letter, for instance, to discuss how the economy is kind of like the game Monopoly, only harder. Nowhere in the body of his four-and-a-half-page missive are there any performance numbers for Bridgewater.
New York’s Greenlight Capital, by contrast, enumerates its losses in the first paragraph of its letter and uses admirably plain language throughout, but readers don’t find out what steps the firm is taking to recover from its steep losses until page three of six. This is a typical annoyance, says Jeff Heil, CIO at the $1.4 billion Doris Duke Charitable Foundation in New York: “They tend to be backward-looking.”
Of course, some letters are more engaging than others. The one from New York–based Paulson Funds, which had another great year betting against the mortgage market, is fun to look at for all its charts and diagrams but reads more like a textbook than a friendly note from John Paulson. Likewise, the letter from Perry Partners International of New York has a college-symposium tone, devoting almost two pages to a grid that debunks bad assumptions it presumes investors made — “Money market funds are safe,” “Diversification will protect you,” “Big banks are safe,” among others.
Some winners couldn’t resist crowing. The long-winded (14 pages) epistle from Graham Capital Management, a managed-futures firm in Rowayton, Connecticut, that had one fund up 52 percent, noted what a crummy year 2008 was — “for other hedge fund strategies.”
