Wednesday, July 12, 2006
To get more in-depth answers on the NFLPA Hedge Fund Scandal, I turned to my friend Kelly McKean, who's the founder and Principal of Blue Corner.
Blue Corner is a boutique marketing and capital introduction firm based in San Francisco. They specialize in building relationships with clients who use the services offered by independent research analysts and both alternative and traditional investment managers.
The firm was founded on the belief that by combining industry best practices with integrity, professionalism and hard work, that they can deliver tangible results to their clients.
1. Kelly, what is a hedge fund?
A private investment vehicle whose manager receives a significant portion of its compensation from incentive fees tied to the fund's performance -- typically 20% of annual gains over a certain hurdle rate, along with a management fee equal to 1% of assets.
The funds, often organized as limited partnerships, typically invest on behalf of high-net-worth individuals and institutions. Their primary objective is often to preserve investors' capital by taking positions whose returns are not closely correlated to those of the broader financial markets.
Such vehicles may employ leverage, short sales, a variety of derivatives and other hedging techniques to reduce risk and increase returns. The classic hedge-fund concept, a long/short investment strategy sometimes referred to as the Jones Model, was developed by Alfred Winslow Jones in 1949.
2. What, if anything, can the NFL PA do to recover their losses?
The assets for the rogue hedge fund have been frozen -- I suppose a judge will decide how the assets are returned to investors on a pro-rata basis.
3. The players are suing the NFL PA. Can they win?
I cannot speculate the answer to this. If the Players Association did not perform proper due diligence on the fund, they could be liable.
Posted by Zennie Abraham at 10:10 AM