Boone Pickens Seeks Investors For Hedge Funds ~ market folly

Monday, July 20, 2009

Boone Pickens Seeks Investors For Hedge Funds

Well, here we go again. After his energy fund lost 98% and his equities fund lost 64% in 2008, Boone Pickens is back for more. Yep, he is raising money for new iterations of essentially the same hedge funds that his hedge fund BP Capital previously ran. Well, we don't even really need to say "essentially" because they literally are the same funds just with a "II" at the end of the name, signaling their second incarnation.

His Energy fund will trade futures and his Equities fund will trade energy related equities and some futures as well. His "II" Energy Fund started trading back in February and is already up a whopping 79%. It's funny how they are undoubtedly using that as marketing material and you can't blame them. However, investors should be aware that the exact same types of funds were obliterated last year. So, a 79% gain this year is not much when you consider how much they were down the year prior. According to fund documents, Pickens will aim to hold investments between 3 months and two years. If you're curious as to what his firm owns, we've covered Pickens' hedge fund portfolio recently here.

As our friend TraderMark over at so poignantly asked, is Boone turning into the next John Meriwether? For those unaware, Pickens had an absolutely brutal last year as his funds lost money, he personally lost money, and every bet he made seemed to go against him. John Meriwether, on the other hand, blew up Long Term Capital Management back in the day and we just recently got word that he is closing yet another hedge fund down. We like to call it the hedge fund boom-bust cycle. Manager starts hedge fund, goes boom to the top of the charts, then goes bust. They then re-group, raise more money, and then start over again. Rinse and repeat. And, repeat again. You get the picture.

So, we like to poke fun at both the fund managers themselves for their propensity to 'blow up' and come right back from the dead with a new fund offering. At the same time, we like to poke even more fun at the investors who continually come back for more. Such is life in hedge fund land. Speaking of 'pokes, we know one institution who will be watching him carefully: The Cowboys of Oklahoma State University. Boone's alma mater certainly loves all of his donations as he has helped revamp the athletics program there. But, after last year, you know they'll be eagerly watching.

It will be interesting to follow Boone's funds now that he's been personally hurt by them so much. You know he certainly doesn't want to blow up again. Additionally, in our recent hedge fund news summary, we also saw that Boone was scaling back his wind energy projects too. So, tough times all around for ole T. Boone. In the end, he will live and die by his funds, as he is their largest investor, at 20%. And for that, we cannot criticize him. We love to see managers with a lot of 'skin in the game.'

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