There really is no way to destroy your reputation in this industry, so long as your failures are spectacular.
John Meriwether, who has already had two hedge funds blow up (LTCM being the most notable), is back for a third, according to FT. The, which will be based in Greenwitch (naturally) will be called JM Advisors Management.
People with knowledge of the situation say the fund is not likely to be ready to launch until next year.
The fund is expected use the same strategy as both LTCM and JWM to make money: so-called relative value arbitrage, a quantitative investment strategy Mr Meriwether pioneered when he led the hugely successful bond arbitrage group at Salomon Brothers in the 1980s.
The strategy, described by the Nobel Prize-winning economist Myron Scholes as being akin to a giant vacuum cleaner “sucking up nickels from all over the world”, can be highly successful in periods following market dislocations.
Relative value trades profit by betting on unusual pricing relationships between securities, anticipating a return to an historically modelled “normal” state between them.
Meriwether is the anti-Taleb. He bets on prices moving back to normal, and most of the time that strategy makes money, but then it’s bound to blow up. Taleb’s whole philosophy is that betting normal is for suckers, so he loses money most of the time, and then occasionally will make spectacular amounts of it.
The craziest part is not that he’s starting a new fund (why not?) but that investors will throw their money at him.