Evaluation of a potential investment in a hedge fund

by scott pickard

I would ask to see a 1-paragraph synopsis on ALL of their equity positions, not just five. If the stocks they are selecting intuitively make sense to you, then that’s a good sign. Of the five equity positions they profiled, I liked their explanations and logic behind their positions. It was easy to understand and made sense to me.

Arbitrage trading is simply mathematical gaming and making money for money’s sake. It has nothing to do with investing in the value of a company’s technology and products. If they’re only doing a small percentage of trades using an arbitrage strategy, it may not be a big issue.

Can they show a graph of the growth of the total $size of fund?

Have they been successful in building their base of investors? What is the current number of investors? Have any investors dropped out? Why?

I would ask for a few callable references so that you could get a current investor perspective on SC’s performance and the investors’ perspective on the quality of reporting and customer service. I would also ask to see a sample quarterly report.

The 2% management fee + 20% performance fee is standard. You need to make sure that the performance fee only applies to the net profits, i.e., profits after losses in previous years have been recovered.

It is also reasonable to require that the performance fees include a “hurdle,” so that a fee is only paid on the fund’s performance in excess of a benchmark rate or a fixed percentage. That is to say, the manager is only rewarded if the fund generates returns in excess of the returns you would’ve received if you had invested your money elsewhere.

What protections does SC provide in the event of fraud or breach of any of the provisions of the Subscription Agreement? I see none. There should be a reciprocal indemnification by SC to the one you would be expected to sign to in section D of the Subscription Agreement.

The Memorandum indicates that you can liquidate and withdraw your account with a 90-day notice, but the Subscription Agreement does not mention this.

In section E, “Power of Attorney,” the LLC should be required to notify investor of any substantive changes made to the LLC on investor’s behalf.

IN SUMMARY:

  • I would not make any kind of decision on this investment until you receive good answers to these due diligence questions and issues.
  • The documentation is very sloppy, and that is concerning. I wouldn’t sign the Subscription Agreement until some of these errors are corrected.
  • If there is one SC, there are hundreds if not thousands to choose from. By comparison to the pool of equivalent investment funds you could choose from, they are very inexperienced. And with inexperience comes higher risk.
Personal Time Investing Buy the rumor, sell the news. But, are you listening to the music or the noise? in general: alternative investments: secondmarket | consumer investing behavior: dcisions | earnings whispers: www.whispernumber.com | books: The Only Three Questions That Count Fisher | gamify: kapitall | idea investing: motifinvesting | impact investing: Global Impact Investing Network GIIN | IPOs: www.hoovers.com/global/ipoc/index.xhtml, http://biz.yahoo.com/reports/ipo.html | Morningstar: www.morningstar.com | Motley Fool: www.fool.com | MSN Investor: http://moneycentral.msn.com | regulation: FINRA | short selling: dangerous | Silicon Investor: www.siliconinvestor.com | startups: DataFox | The Street: www.thestreet.com brokers: E*Trade: https://us.etrade.com | Fidelity: https://www.fidelity.com | kapitall | Schwab: https://www.schwab.com | TD Ameritrade: www.tdameritrade.com | thinkorswim

Historically only 18% of fund managers beat the S&P500 index on a consistent basis.

sp

Imagine H2O

Imagine H2O is a nonprofit organization with a mission to inspire and empower people to solve water problems.

Hydrosphere Water We pay for water when we use it, and we pay for water when we get rid of it. GLOBAL: How are humans changing the global water cycle, the associated biochemical cycles, and the ecosystem function of the global water system?  What are the socio-economic and environmental feedbacks arising from these changes? Will a lack of water threaten energy production?  How can everyone have sufficient clean water without conflict?  INDUSTRY: Is the water quality of the plant internally and externally in compliance with relevant environmental laws?  What percentage of the company's revenues does it spend to maintain water quality to mandated levels? Is it reasonable or getting out of control? in general: | about | catastrophes: West Virginia | conservation: Americans have no idea how much water they’re using Yoshida | images | point-of-use (POU) purification: www.halosource.com, hydronovation | serionix, SODIS solar disinfection | modeling: aquaveo, WaterML 2.0 | organizations: water.org |  rain  barrels | recycling: stillsuit | research: Global Water System Project | scarcity: When the well runs dry, we shall know the value of water. Franklin, The End of Abundance Zetland | smart sprinkler systems: www.cyber-rain.com | sponsored projects: bluewater.rbc, charitywater | underground lakes: Kenya | ventre capital: Imagine H2O > Venture Capital | water cycle: video, diagram | water from air: islandsky big ideas | waterless textile dyes: airdye | water rights: California Water Wars  top educational literacy: α (1 / diarrhea) α (clean drinking water) α (solar rays + water) water quality: arid environments: sand dams | rooftop tanks: Inside City’s Water Tanks, Layers of Neglect Rivera | filter mechansisms: drinksoma, puremadi, WaterBean |bottleless water coolers: quenchonline | denitrification: eosenvironmental | desalination: www.altelainc.com onsite, voltea | on-site potable water purification: www.clearwatercomplianceservices.com, www.miox.com | pool-in-a-river: pluspool |  USEPA Sole Source: Mahomet Aquifer | wastewater filtration: mmfwater books: The Big Thirst Fishman | The Great Lakes Water Wars | Water Wars: Privatization, Pollution, and Profit Shiva Venture Capital | Sustainability

Imagine H2O is a nonprofit organization with a mission to inspire & empower people to solve water problems. Our vision is to turn water challenges into opportunities.

The Rise and Rise of Bitcoin

Will the rise of Bitcoin bring a monetary paradigm shift that will forever change the world?

Production & Utilization of Wealth/Money Currency and Exchange  search What has been the impact of the fluctuating value of the dollar on the company's import and export activities?  What protective measures does the company take against currency fluctuations?  What exploitive measures does the company take with respect to currency fluctuations? in general: calculators: www.x-rates.com | open source: opencoin | paper: fortresspaper | sending/receiving: stellar | trading: forex, www.fxall.com, www.oanda.com | virtual currencies: amazon coins, webmoney | Wolfson Economics Prize big idea bitcoin: about: FBI assessment | ATM |  buy/use/accept: coinbase | documentary: The Rise and Rise of Bitcoin Globalization | Financial | Risk | Inflation | Innovation | Intl | Monetization

How bad a shape is Illinois in?

The looming bankruptcy red flags continue to mount for Illinois as individuals and companies exit the state in search of good jobs, lower taxes, and to escape the entrenched cronyism, corruption and dysfunctionality of its politicians and unions.

Financial Management Cash Management What anti-check fraud procedures are in place?  Do we have systems in place to detect money laundering?  Are all bank accounts reconciled each month? What minimum cash balance is appropriate for the company?  Is the company using every available technique to minimize transfer time for collecting cash balances? (a) rapid billing; (b) lock boxes; (c) discount policy; (d) collection efforts  Who is authorized to make payments of company funds and what amounts are they authorized to disburse?  Are authorized persons bonded at the appropriate amounts?  What is the company's plan for optimizing the balance between maintaining the liquidity of excess cash vs. generating maximum short-term and long-term interest income? What proactive measures are taken within the company to prevent embezzlement? cash flow: What are the long-term cash needs for the company for the purchase of property and equipment?  What effect does the variation in key assumptions (sensitivity analysis) have on the financial projections? | cash flow statement: direct vs indirect | check fraud: anti-check fraud procedures | Forecasting Cash Flow sp | money laundering: detect money laundering bankruptcy: Has the company ever filed, or considered filing, for bankruptcy?  Are any of the company’s vendors in bankruptcy or near bankruptcy? | American Bankruptcy Institute: www.abiworld.org | appraisal of asset values: www.accuval.net | banks: bank run |checklist: IRS | IR Internet Bankruptcy Library: http://bankrupt.com | liquidation services: www.liquitec.net investment policies: What is the minimum acceptable investment return on capital items?  How are lease vs. purchase decisions evaluated?  What is the company's investment policy with respect to excess cash?  How much is kept in short-term marketable securities?  What is the record of gains (losses) from sales of securities in the company's portfolio?  Does the company perform background checks on either the firms or individuals that handle the company's trading in securities? Checklists | Cities | Identity Management | Personal Finances

 

Closing the Innovation Gap

“Our short-sightedness has led to major challenges — dependence on oil, climate change, health care, and national security — that threaten our economy and quality of life. Each challenge also brings opportunities — if we give innovation the attention it deserves.”

Engineering and R&D Research and Development  search What’s likely to be the “next big thing?” What might be the most fertile areas for innovation? Where should countries and companies invest their limited research funds? What technology areas are a company’s competitors pursuing? How are projects chosen for R&D?  What is R&D’s past record for successful completion of projects to budget and schedule?  When does management expect products will reach the market from research projects currently underway?  Is the company working smart to optimize the FDA approval process?  How would management rate the company’s R&D operations against its competitors?  How well does R&D integrate its work with marketing?  End user?  Engineering?  Production?  Is R&D’s major emphasis applied or basic research?  How much do the company’s projected financials depend upon successful new products developed by R&D?  Does the company effectively protect the secrecy of R&D projects?  Is there sufficient federal financing to support R&D at adequate levels?  What is the company’s approach towards capitalization of R&D expenses?  Is management well informed of R&D activities?  Are the company’s research facilities adequate?  How confident is management that R&D’s team and plan will lead to the right product(s) at the right time?  Has management evaluated the cost-effectiveness of shifting some portion of R&D expenditures and operations to external sources? (a) venture capital funds; (b) R&D alliances; (c) government funding such as ATP in general: Chance favors the prepared mind. Pasteur | citations: zotero | crowd funding: experiment | design of experiments: about | electronic lab notebooks: www.intellichem.com | ethics: Integrity in Research and Publication | europe: cordis | www.evaluatingresearchcenters.com | incentivization: prize challenges | magazines: rdmag | matching problems with solutions: www.innocentive.com | molecular imaging: www.visenmedical.com | networks: internet2 | patents: mapping | pharmaceutical R&D: www.teranode.com, wingu | poster template | rent & read: deepdyve | research universities: www.aau.edu | videos: labtv academic: The traditional metric of academic capital is citations. | Should researchers make their source code available when submitting a research paper to a peer-reviewed scientific journal? | bio template: publications.ca | data sharing: figshare | funding opportunity announcements: grantforward | impact: h-index | news: futurity | scientific literature: Action Science Explorer | Association of Research Libraries | open access, peer-reviewed joournals: peerj, plusone.org  | social networking: academia.edu | Search: academic.research.microsoft federal labs: Argonne National Laboratory: www.anl.gov | Idaho National Laboratory: www.inl.gov | Kansas City Plant: www.kcp.com | Lawrence Berkeley National Laboratory: www.lbl.gov | Lawrence Livermore National Laboratory: www.llnl.gov | Los Alamos National Laboratory: www.lanl.gov | National Renewable Energy Laboratory: www.nrel.gov | Oak Ridge National Laboratory: www.ornl.gov | Pacific Northwest National Laboratory: www.pnl.gov | Sandia National Laboratory: www.sandia.gov | Y-12 National Security Complex Heilmeier Catechism: What are you trying to do? Articulate your objectives using absolutely no jargon.  How is it done today, and what are the limits of current practice?  What's new in your approach and why do you think it will be successful?  Who cares?  If you're successful, what difference will it make?  What are the risks and the payoffs?  How much will it cost?  How long will it take?  What are the midterm and final "exams" to check for success? | The Heilmeier Catechism Visits the University sp lab management: workflow management: accelrys | software: quartzy free multidisciplinary research: What are the top ten actions that Congress, the federal government, state governments, research universities and others could take to assure the ability of the American research university to maintain the excellence in research and doctoral education needed to help the United States compete, prosper, and achieve national goals for health, energy, the environment, and security in the global community of the 21st century? Stanford | synthesis centers: science incubators | World Café charrette translation of project results: To what extent do the research issues being pursued relate to challenges along the pathway towards achieving meaningful use?  How effective are the methods used to accelerate translation of research into application(s)?  To what extent has the project identified the salient, potentially breakthrough challenges?  Are innovative research methods being applied to meet the ultimate research agenda?  What problems have been encountered in implementing all of the required features of the project?  What relationships has the project established with industry to facilitate the translation of the research? | funding: action science: definitions | proof-of-concept books and articles: Breakthrough Stefik | Closing the Innovation Gap Estrin | Evaluating Research Centers & Institutes for Success! Tash | Scientists Popularizing Science: Characteristics/Impact of TED Presenters Sugimoto Innovation | Crowd | Science | Collaboration | Atoms | IP | News | Big Data

Crowd funding scientific research

Science for the people, by the people.

Engineering and R&D Research and Development Chance favors the prepared mind. Pasteur What’s likely to be the “next big thing?” What might be the most fertile areas for innovation? Where should countries and companies invest their limited research funds? What technology areas are a company’s competitors pursuing? How are projects chosen for R&D?  What is R&D’s past record for successful completion of projects to budget and schedule?  When does management expect products will reach the market from research projects currently underway?  Is the company working smart to optimize the FDA approval process?  How would management rate the company’s R&D operations against its competitors?  How well does R&D integrate its work with marketing?  End user?  Engineering?  Production?  Is R&D’s major emphasis applied or basic research?  How much do the company’s projected financials depend upon successful new products developed by R&D?  Does the company effectively protect the secrecy of R&D projects?  Is there sufficient federal financing to support R&D at adequate levels?  What is the company’s approach towards capitalization of R&D expenses?  Is management well informed of R&D activities?  Are the company’s research facilities adequate?  How confident is management that R&D’s team and plan will lead to the right product(s) at the right time?  Has management evaluated the cost-effectiveness of shifting some portion of R&D expenditures and operations to external sources? (a) venture capital funds; (b) R&D alliances; (c) government funding such as ATP in general: citations: zotero | crowd funding: experiment  search design of experiments: about | electronic lab notebooks: www.intellichem.com | ethics: Integrity in Research and Publication | europe: cordis | www.evaluatingresearchcenters.com | incentivization: prize challenges | magazines: rdmag | matching problems with solutions: www.innocentive.com | molecular imaging: www.visenmedical.com | networks: internet2 | patents: mapping | pharmaceutical R&D: www.teranode.com, wingu | poster template | rent & read: deepdyve | research universities: www.aau.edu | videos: labtv academic: The traditional metric of academic capital is citations. | Should researchers make their source code available when submitting a research paper to a peer-reviewed scientific journal? | bio template: publications.ca | data sharing: figshare | funding opportunity announcements: grantforward | impact: h-index | news: futurity | scientific literature: Action Science Explorer | Association of Research Libraries | open access, peer-reviewed joournals: peerj, plusone.org  | social networking: academia.edu | Search: academic.research.microsoft federal labs: Argonne National Laboratory: www.anl.gov | Idaho National Laboratory: www.inl.gov | Kansas City Plant: www.kcp.com | Lawrence Berkeley National Laboratory: www.lbl.gov | Lawrence Livermore National Laboratory: www.llnl.gov | Los Alamos National Laboratory: www.lanl.gov | National Renewable Energy Laboratory: www.nrel.gov | Oak Ridge National Laboratory: www.ornl.gov | Pacific Northwest National Laboratory: www.pnl.gov | Sandia National Laboratory: www.sandia.gov | Y-12 National Security Complex Heilmeier Catechism: What are you trying to do? Articulate your objectives using absolutely no jargon.  How is it done today, and what are the limits of current practice?  What's new in your approach and why do you think it will be successful?  Who cares?  If you're successful, what difference will it make?  What are the risks and the payoffs?  How much will it cost?  How long will it take?  What are the midterm and final "exams" to check for success? | The Heilmeier Catechism Visits the University sp lab management: workflow management: accelrys | software: quartzy free multidisciplinary research: What are the top ten actions that Congress, the federal government, state governments, research universities and others could take to assure the ability of the American research university to maintain the excellence in research and doctoral education needed to help the United States compete, prosper, and achieve national goals for health, energy, the environment, and security in the global community of the 21st century? Stanford | synthesis centers: science incubators | World Café charrette translation of project results: To what extent do the research issues being pursued relate to challenges along the pathway towards achieving meaningful use?  How effective are the methods used to accelerate translation of research into application(s)?  To what extent has the project identified the salient, potentially breakthrough challenges?  Are innovative research methods being applied to meet the ultimate research agenda?  What problems have been encountered in implementing all of the required features of the project?  What relationships has the project established with industry to facilitate the translation of the research? | funding: action science: definitions | proof-of-concept books and articles Breakthrough by Mark Stefik & Barbara Stefik Evaluating Research Centers & Institutes for Success! by William R. Tash Scientists Popularizing Science: Characteristics/Impact of TED Presenters by Sugimoto Crowd | Science | Collaboration | Atoms | Innovation | IP | News | Big Data

Mary Barra vs the Dysfunctional GM Culture

by Scott Pickard

Sarah, very interesting article and your recommendations are well-intentioned and truthful, but, I give them a slim chance of making a dent in the sprawling, dense and calcified GM cultural fabric which has deeply embedded within it the familiar dysfunctional qualities of a massive bureaucratic organization. In this regard, human nature repeats itself with disappointing consistency. In very large corporations, universities, government units, and military, this is what we face and deal with every day.

It confirms to me that GM was probably not “too big to fail.” Failure could have been the disruptive event necessary to purge the dysfunction and clear a path for renewal — a “corporate reboot” if you will.  Bankruptcy would have provided the platform and mandate for sweeping away all the dead wood, political toxicity, cronyism, greed, and staleness that builds up over time inside society’s largest institutions.

Law Crime, Corruption, Power, Violence How can we rethink security beyond mass incarceration? How can transnational organized crime networks be stopped? Is there anything goingon in the company that can result in an Enron-style financial collapse? (a) self-dealing; (b) undisclosed insider trading; (c) unauthorized compensation; (d) debt-loaded limited partnerships in general: archive: Crime Library | biology: The Anatomy of Violence Raine | city shootings: ceasefirechicago, Cradle-to-Grave Program | cybersecurity: antiphishing, AccessData, onguardonline | depravity: Crime and Punishment Dostoyevsky | gangs: Home Boy Industries, knockout game | gun violence/control: gun-rights lobby | insider trading: Rajaratnam | jewel thieves: Pink Panthers | kidnapping | organized crime: Hell’s Angels | policing software: Mark43 | research: Crime Lab | school shootings | sex offenders: Miracle Village | TV shows: http://en.wikipedia.org/wiki/List_of_police_television_dramas, Orange is the New Black prison | white collar: nw3c insider trading: Has the company made a reasonable effort to make all insiders (executives, employees, directors) aware of the insider trading rules? | documentary: To Catch a Trader | SEC Filings: www.10kwizard.com power: How is power consolidated in the company?  Are directors careful to not get involved in the internal politics of the company? | greed:  about, The Wolf of Wall Street vigilante: about | Bruce Willis | fiction/comics: batman, robin hood, superman | Mexico: drug cartels | Paul Newman | Death Wish | Steven Sigal | Three Days of the Condor weapons: bombs: toothpaste books/movies: Crime and Punishment Dostoyevsky | Inside Job | Syndromes of Corruption: Wealth, Power, and Democracy Johnston | The Onion Field Wambaugh Decisions | Issues | Emotions | Ethics | Smart Grid | War | Survival | Sports

Had that happened, then “creating opportunities for collegiality to take root….encouraging questions that create context….. helping employees to feel safe by reshaping the work environment…,” might have been introduced into a clean, fear-free, accepting cultural landscape.

But, it didn’t happen, so best of luck to Mary Barra.

Don’t get me wrong, I’m all-in for capitalism with its faults, but we all know the aggressive pursuit of profit in BIG BUSINESS (with power and greed lurking in the headquarters’ shadows) has its dark side.

sp

DAVOS: World Economic Forum

Economic Theory and Systems Economic Theory: index of economic freedom Economic Systems Historical development of economic systems Capitalism Centrally-planned systems Appraising economic systems The Consumer and the Market Scarcity, utility, and value: behavioral economics: | Valuation Consumer behavior: Buying Decisions | inelasticity Markets: markets hate uncertainty | Randomness Price system in capitalist economies Organization of Production and Distribution Organization of the production of goods Marketing and Merchandising Inputs of the productive process Institutions that facilitate business formation, production, output Money Currency & Exchange Banks International: Bank for International Settlements BIS economic statistics business organization stock markets Agricultural economics International trade Government’s role in production & distribution Methods of business organization Advertising & Promotion Distribution of risk Consumer credit For a disciplined credit card user, the interest rate is essentially irrelevant because a credit-smart consumer pays off the most recent transactions with each monthly bill; i.e., you never carry an outstanding balance which is the most powerful way to build a solid credit rating.  If you want a rewards program with your card, then that generally requires an interest rate greater than 0% and the higher the interest rate, the better the rewards since interest income is what covers the cost of the rewards program for card issuers.  But as previously stated, if you are paying off the transactions each month and not carrying an outstanding balance, the high interest rate is irrelevant.  BOTTOM LINE: use a credit card for convenience, security (don’t have to carry alot of cash around), and to create a detailed transaction record,  but not as a loan! Distribution of Income and Wealth the rich get richer and the poor get poorer Matthew Effect Distribution by categories of the population: Forbes 400 | gini coefficient How government affects the distribution Capitalism Taxation Laffer Curve postulates that no tax revenue will be raised at the extreme tax rates of 0% and 100% and that there must be at least one rate where tax revenue would be a non-zero maximum. Poverty Macroeconomics National income and employment theory: misery index Intl. equilibrium and disequilibrium Business cycles Inflation and deflation Economic Growth and Planning Nature and causes of economic growth Planning for economic growth and stability Government Finance Growth books, forums, journals Stealth of Nations by Robert Neuwirth The Mystery of Capital by Hernando De Soto big ideas The Wealth of Nations by Adam Smith Wall Street Journal World Economic Forum Davos Globalization | Buying | Acquisitions | Economics | Human Rights | Issues |