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The month of March was a terrible time for the investment market but a great time for hedge funds, according to Michael Harron, managing partner of TMF Capital Management. Harron spoke to the Investment Management Group, led by students in the Evening MBA and Weekend MBA Program at Gleacher Center April 19. “In the past, investors didn’t capitalize on loss,” he said. “Hedge funds do. Hedge funds are in business to take advantage of dislocations. This is a phenomenal time.”
Harron predicts investors will see great returns in the next three to four months. “I buy way down,” Herron said, “and I sell way up. I’m looking to buy right now.”
He equated the subprime market failure with the collapse of the savings and loan industry in the 1980s. Investors think capitalization is over, but it’s not. “The game is fixed because of government intervention. Bear [Stearns, www.bearstearns.com,] should have been able to fail,” he said. “Will we recover? Yes. Will leverage come back? Absolutely. Will this happen again? You bet,” he said. “It’s human nature.”
Hedge funds are booming. There are currently 9,500 worldwide, with $1.4 trillion in assets — double over the past five years. Herron said there was a 220 percent increase in 2007.
For those with an MBA, several routes can lead to working at a hedge fund. “Hedge fund managers don’t have time to teach. There’s very little you can do that has the infrastructure to do convertible arbitrage. Start with investment banking, then private equity, then long-short,” Herron said. “Cut your teeth and move on. Investors may change jobs seven times in their careers.”
Herron’s advice was just what IMG co-chair Sorin Dan was looking for, he said. “This is an industry GSB students and alumni should know about,” he said. “Listening to Herron adds value to the GSB experience because it offers information on another asset. The more choices we have, the better.”
— Carmen Marti