Overgrown and full of deadwood
Every major correction seems to claim at least one big scalp from the hedge-fund world - usually some brash young manager with bundles of cash and not a lot of experience. But last October, it was a legend of the business, Victor Niederhoffer, who crumbled. With his funds already down almost 50% after he tried, and failed, to pick a bottom in Thai equities that August, Niederhoffer was wiped out when he was caught short S&P 500 puts during the US market fall just two months later. When he was unable to meet a margin call, his positions were quickly liquidated and with them went his $70 million portfolio.
It was a cruel twist of fate for an eccentric but brilliant investor. For most of his career, Niederhoffer, a former national squash champion and university professor, was a well-kept secret, managing money only for family and friends (among them George Soros). Whatever the asset - currencies, commodities, stock index futures and bond futures were his mainstays - Niederhoffer's mission was always to "apply science", as he put it, to the market.
His approach paid handsome dividends.