Hedge fund gang works hard, plays hard

Let’s start today by acknowledging that in a Las Vegas calendar brimming with first-class conventions, the hedge fund guys really know how to do it right.

The annual SALT conference, organized by SkyBridge Capital, slips in and out of town on cat’s paws. They know who their audience is and who it isn’t. There’s no fuss and no public face to draw the attention of the Bernie Sanders’ supporters.

Make no mistake – these guys are the ones with their fingers on the pulse of the global economy. And money really isn’t a concern in staging this event.

The Killers, fresh from opening the T-Mobile Arena, played in the Bellagio’s ballroom. The night before, The Wailers played on a stage erected by the pool. Luncheon speakers were basketball great Kobe Bryant and satirist Dennis Miller.

The program speakers were similarly a who’s who of heavy hitters. Former Treasury secretaries Robert Rubin and Lawrence Summers came by to talk about the economy. Democrats Donna Brazile and Jim Messina sparred with Republicans Karl Rove and Margaret Hoover on politics. Michael Bloomberg talked about both topics and why he isn’t running for president.

There were chats with oilman T. Boone Pickens, TV Shark Mark Cuban and real estate developer Sam Zell. Gen. David Petraeus shared some thoughts as did author Michael Lewis and Hollywood’s Will Smith, Caitlyn Jenner and Ron Howard.

And of course there were the stars of the industry – the folks who routinely manage hundreds of billions of dollars – talking about the intricacies of analysis and trading.

Outside, conversation pits were everywhere, just right for making that next deal. These folks really put the dollar sign in networking.

Of all the events I do each year, I learn the most from SALT. So here are a few things I learned:

■ The investment world works best when there is a level of certainty in the rules and a level of predictability in actions. That’s what has the hedge fund community bringing in the lawn chairs ahead of the storm. They see neither certainty nor predictability in a Trump presidency. And that’s not good. They see certainty and predictability in a Clinton presidency, and they can predict with certainty they’re not going to like it.

■ The hedge fund community understands it’s on the hot seat. Public opinion puts hedge fund managers below used car salesmen. The populist swirl suggests the next president, no matter who it is, will endorse regulatory and taxation changes. The low-return bond market is putting a squeeze on returns and clients are increasingly resistant to the ‘2&20’ fee structure – 2 percent of assets plus 20 percent of profits. With more programmatic trading, the commissions just don’t support staffing levels and the hedge fund industry is near a crossroads.

■ Declining fuel prices have been a windfall for airlines which are at the top of an industry cycle. The consensus seems to be that can’t continue and the pros are looking to sell short. Europe is looking better; gold got a mixed review. Oil is headed higher but the challenge is in timing.

■ Keep an eye out for technology called Blockchain. It’s an intricate system of moving high-value assets across the Internet through a maze of computers that all must have identical data or the move doesn’t happen. The goal is to foil the increasingly ingenious hacker community.

■ And then there’s the matter of Kobe’s next career. Perhaps the largest group gasp came when the recently retired basketball player said his goal was to become the next J.K. Rowling. Over a luncheon of Kobe beef, Bryant said he admires the author of the Harry Potter books and has developed a parallel universe of mythological proportions built around sports. He’s working on developing the narrative and won’t rush it. It’ll be released only when it’s right.

Based on table chatter, it sounds like blackjack is the game of choice. Certainty. Predictability. And maybe there’s an edge for the technicians. At least until the regulators swoop in.

Sounds a lot like the environment they work in every day. No wonder they like it here.

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