January 13 2009
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives. We saw this article in a newsletter from one of our readers, and we thought it was a good follow-up to our article last week, Due Diligence from a Distance.
Five years ago, in February of 2004, I read a profile in The Wall Street Journal of a 28-year-old hedge fund manager that was so weird, I clipped it out and saved it in my notebook.
The story focused on the return to high living in financial circles, and used Brett Grebow, cofounder and principal of The HMC International Fund, as its prime example. Among the excesses he shared with the reporter were his purchase of a $160,000 Lamborghini ("his first 'treat' in months") and the chartering of planes for $10,000 a pop to fly between Florida and New York (an air corridor not exactly underserved by commercial aviation).
But what really caused me to whip out the scissors and save Mr. Grebow's story for posterity was his reasoning for spending $10,000 on a private jet instead of say, $300 on JetBlue: "It's fantastic. They've got my favorite cereal, Cookie Crisp, waiting for me, and Jack Daniel's on ice."
Hmmm. If Warren Buffett, a bona fide billionaire, is compelled to christen his private jet when he finally buys one "The Indefensible," it would seem that Grebow was guilty of a serious lapse in judgment - in both capital allocation and discretion (if not taste in breakfast cereal).
I remember wondering at the time how good at investing a guy like this could possibly be. Not to mention what his clients would think once they saw how he had presented himself to the world.
Almost two years later, in a Christmas present to investors, the SEC filed suit against Grebow and his partner for stealing $5.2 million of the $13 million they'd raised from 80 investors. The HMC International Fund, whose motto was, ironically, "integrity & performance," was promptly shut down. From there, all the woulda, coulda, shouldas came forth in the press and blogosphere, as a cursory check of Grebow's background on Google and other sources would have shown a, shall we say, troubled past.
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