Physicist hedge fund guru posts lukewarm returns

(MoneyWatch) Having recently read James Weatherall’s book “The Physics of Wall Street” I was interested in the article “Against the Current,” about Andrew Tsai, a physicist turned hedge fund manager which appears in the April 2013 issue of Institutional Investor.

Tsai is the chief investment officer of the Chalkstream Capital Group, a fund of hedge funds that was founded in 2003. The article discusses how Tsai needs to be exceptional as his clients are almost entirely partners and executives at hedge funds and major banks as well as asset managers who have entrusted Tsai with their personal capital. These are obviously people with high expectations. The fund’s strategy is to “traffic in areas where there is not a lot of capital chasing for returns.” Tsai added: “We think traditional asset allocation is very dangerous. We are not in the business of filing buckets: we are in the business of finding opportunities.”

The article is filled with praise for Tsai from such luminaries as Michael Burry (who ran the Scion fund and became famous for his bet against sub-prime mortgage backed securities). Robert Stavis, an early investor in Chalkstream and a partner in the venture capital firm Bessemer Venture Partners, stated that he was impressed by “what they are trying to do, which is not be just an index of alternatives but to have a thoughtful view on any part of the investment cycle and to try and articulate that by finding themes and investing in those themes.” Arjun Divecha, chairman of the board of GMO, expressed his confidence stating: “What I particularly like is their choice of interesting investment theses. It is really the quality of the thinking and the analysis.” The article went on to note that Tsai and his 12-member team “have caught some of the most interesting and profitable trades of the past decade.”

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