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Alternative Market Briefing

The invasion of marginal talent: Hedge funds and the investment counseling business of the late '60s, early '70s

Tuesday, April 24, 2018

Komfie Manalo, Opalesque Asia:

The evolution of the hedge fund industry has some interesting parallels to the development of the investment counseling business in the late '60s and early '70s, said Rick Doucette, CEO and CIO of Antecapio Investment Partners at the latest Opalesque Connecticut Roundtable.

The changes happened specifically because of the economics of the managers. The reason why the independent investment counselor industry grew back then was because at the time, most of the assets were held by banks and insurance companies, and the general policy of these institutions was was that nobody could make more money than the CEO or president of the organization, he added.

Doucette said, "So, the natural inclination of the best investors was to leave the bank or insurance company and start their own investment counseling firm where they had no ceiling on their compensation. The barrier to entry at that point in time was negligible, much like the hedge fund industry in the 90s, early 2000 - a Quotron, an assistant and a phone. So anybody that recognized that the economics of an independent investment counselor were much better than at a bank or insurance company left, regardless of their talent."

The first bank and insurance executives who left were really smart, as were the most talented who started their own hedge funds one or two decades later. Luckily, these early pr......................

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