Friday, August 20, 2010

Paolo Pellegrini of PSQR Capital Returning Clients Money

The right hand man to John Paulson, Paolo Pellegrini [Oct 2, 2009: Paolo Pellegrini on Bloomberg]  who struck out on his own just a few years ago, is showing outside investors the door from his hedge fund.  This is the second high profile exit of the week - albeit this is sort of a quasi exit.  Checking the scoreboard this week:

HAL9000: 2
Humans: 0

I am wondering if the frustration of a market that has the logic of a first grader, where "long term" means "tomorrow", where individual fundamental stories mean almost nothing versus what ETF the stock is in, and thinking is looked down upon as every asset trades in lockstep in almost perfect correlation as computers whirl and buzz generating 70% of the volume in a market vacated by carbon life based objects, is causing some of the issue.  [Jun 29, 2010: Correlations Among Asset Classes Reach Ever Higher Extremes as HAL9000 Algos Dominate Life]   Certainly trying to create trades that would work for longer than 3 hours has become useless when each and every market (commodities, currencies, equities) is 95% based on guessing which way the S&P 500 is going to trade each day.  [Aug 5, 2010: Hedge Fund Strategies Finding 2010 Difficult]  Pellegrini is not even a 'buy and hold' type - he is a very active trader whose positions apparently average 1 week in length... but that's an eternity for HAL9000 who is back to 100% cash each night, ready to move the entire market en masse one way or the other each morning in the 'student body left' trading symphony.  [July 8, 2010: Hedge Funds "Frozen in Headlights" as BiPolar Market with 1:1 Correlation in All Things Not Named U.S. Treasuries Causes Confusion

Ironically, as we just saw videos by Celente (I edited the piece to add the new 3rd video), Pellegrini is another guy who in the October piece cited above was not afraid to tell it like it is, and speak about what a broken system we have created.

For history sake - Pellegrini made 40% in 2008, 62% in 2009, and -11% YTD in 2010.  The end (for now). Maybe he'll come back as a quant fund and just smoke cigars 6.5 hours a day, while the computers do all the work.  HAL's master plan to exterminate these nasty inefficient humans seems to be going according to plan.

[click to enlarge]

Via Bloomberg:

  • Paolo Pellegrini, the former Paulson & Co. executive who helped that firm make more than $3 billion with bets on a U.S. housing crash, plans to return money to outside investors in his hedge fund after losing about 11 percent this year, according to a person with direct knowledge of the decision.
  • Pellegrini will continue to manage his own money, and he may reopen the fund to outside clients in the future, the person said.
  • Pellegrini, 53, started his hedge fund after helping billionaire John Paulson engineer a bet against subprime mortgages that catapulted their hedge funds to gains of as much as 590 percent in 2007. At PSQR, he runs a macro hedge fund, which seeks to profit from broad economic trends by trading stocks, commodities and currencies, and holds his trades for an average of a week.
  • PSQR won’t charge fees to clients until he recoups losses, the person said. 
  • Pellegrini, who was born in Italy and has a Harvard Business School MBA, told clients that he decided to stop managing their money because of the “additional work” required due to his bearish outlook on the economy, AR Magazine said, citing an investor letter.

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