We Gained 46% in 2008 and Lost Assets. Then We Were Flat in 2010 and Raised $300M.

Our leveraged share class gained 46% in 2008 and investors still took money out.

Two years later, we were essentially flat and assets exploded.

At the beginning of 2008, we managed approximately $180 million.

By year-end, AUM had grown to roughly $240 million.

On the surface, that looks like growth.

But after accounting for a 46% gain, the reality was very different.

We experienced significant net outflows.

Investors needed liquidity.

They had redemptions elsewhere.

They had margin calls.

They had businesses to support.

And they weren’t necessarily selling their worst investments.

They were selling the investments they could actually redeem.

Many hedge funds imposed gates during the financial crisis.

We didn’t.

We offered weekly liquidity.

Ironically, that made us one of the easiest places for investors to raise cash.

Then something interesting happened.

In 2010, our performance was essentially flat.

Yet assets under management grew from approximately $380 million to $680 million.

Why?

Because investors weren’t rewarding our 2010 performance.

They were rewarding what we had done during the financial crisis.

One of the biggest lessons I learned in the hedge fund business is that performance and asset flows rarely move in sync.

Sometimes you deliver exceptional returns and lose assets.

Sometimes performance is mediocre and assets flood in.

Performance matters.

But in the asset management business, money flows often matter more.