LAHDE CAPITAL MANAGEMENT LLC
Established: 2006 (Closed September 2008)
Headquarters: 2400 Broadway, Santa Monica
Principal: Andrew Lahde – Assets: $80 million
Andrew Lahde is not your average hedge fund manager.
In an industry built on discretion, the 37-year-old Andrew Lahde has earned a reputation for his outspokenness.
As the founder of Lahde Capital Management, he built a small fortune for his prescient bet against subprime mortgages loans shortly before the industry collapsed. His firm has been one of the most successful in the L.A. hedge fund industry over the past two years, but he decided in September to shut down his fund and return money to investors, saying market volatility had become too risky.
But in doing so, he generated headlines with an outrageous goodbye letter.
“I was in this game for the money,” he said in the letter, dated Oct. 17. “The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government.”
This activity, the letter continued, “only ended up making it easier for me to find people stupid enough to take the other side of my trades.”
The meandering letter closed with a plea to legalize marijuana.
Lahde, who earned his undergraduate degree from Michigan State University and his M.B.A. from UCLA, had worked at another L.A. hedge fund, Dalton Investments, before starting up his own firm in 2006.
His strategy was simple: On the hunch that the mortgage market was primed for a meltdown, he used derivatives to short sell the debt-market value of subprime loans.
Though a downturn in the housing market was expected, few foresaw the extent of the decline and Lahde’s fund earned a whopping 870 percent return. With a flare for the dramatic, Lahde said in an investor letter in late 2007 that his fund had the best performance “for all hedge funds in the universe.”
Since then, he opened several additional funds, including the Short Credit fund, a $48 million fund betting on the credit quality of banks, which was up more than 16 percent for the year when it was closed.