Andrew Lahde: The Hedge Fund Manager With a 1000% Return

by: Felix Salmon

To the pantheon including subprime shorter John Paulson and Amaranth vanquisher John Arnold we should probably now add Santa Monica hedge fund manager Andrew Lahde. Lahde almost certainly hasn't reached the billion-dollar-a-year club, but he does now officially oversee a fund – the poetically named US Residential Real Estate Hedge V Class A – which is up 1000% year-to-date.

Lahde's still very bearish on both housing (he has a new fund to short commercial real estate) and on the economy more generally (he's predicting a deep recession). But it seems he thinks the bloodletting in residential real-estate might be over: he's returning money to his investors, telling them “the risk/return characteristics are far less attractive than in the past”.

In a way, given the sheer number of hedge funds out there, and the increasing amounts of leverage they employ, it's a little surprising there aren't more funds which return 1000% in a year – and it's actually quite reassuring that such things are still rare. To have one enormously successful year, like Lahde or Paulson, can make a man dynastically wealthy. But it doesn't make him an investing great like Buffett or Swensen or Lynch.

Remember that during the housing bubble, people were regularly making 1000% returns on their own money by buying and flipping condos with little or no money down. In a way it's only just that now a few hedge fund managers are making equally large returns by making bets in the opposite direction.