Originally Posted by
Stranger_Danger
30% per annum is definitely possible - for a while. However, I doubt very much it has been happening here lately.
Why?
(a) Seeking high returns, and managing other peoples money, do not go hand in hand. I know this sounds silly because that is what an investor says they want to pay for, but it simply doesn't work.
To get 30% per annum over a long period, the record isn't going to read 30%, 30%, 30% etc etc etc. A record like that would almost certainly indicate something dodgy is happening.
It is more likely to read +85%, +40%, -35%, -12%, +134%, -40%, +80% etc etc.
The sort of person that hands over their money to others to invest is usually the sort of person that can't handle that sort of volatility and wants to take back their money at the bottom, not realising that a strategy aimed at 30% is inherently volatile and risky and bad years are utterly guaranteed.
(b) 400mil or so under management is starting to get to the level where you shouldn't even be aiming for 30%.
Many of the strategies you need to employ - under-diversification, overweighting small caps etc etc - start to fail at those sorts of numbers.
This is why Buffett has always said - and I believe him - that he could do 50% per annum with 10 million, but has continually reset expectations downwards as he got bigger.
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My instinct (and I have zero insider info here) and that this guy probably did start off honest and and could well have achieved those high returns for a while.
However, as his investors aged, and their demand for cash grew, given strategies that involved illiquid positions in small caps, even if we assume 100% honesty and integrity, you can easily see how problems could occur, just because of the size outgrowing the strategy.
Bottom line : Manage your own money, yourself. If you don't enjoy doing so, give it to the poor.