Joe Taussig participated in the creation of David Einhorn's Greenlight Capital Re and other innovative structures, advising hedge fund founders how to set up insurers, reinsurers, and banks that invest their equity capital and some of their liability generated assets (Buffett's "Float") in hedge fund strategies.
Permanent Capital is Key
In this Opalesque BACKSTAGE video, Taussig explains how hedge fund founders benefit from the "structural alpha" these innovative vehicles create, which by the way is exactly what Warren Buffett did when he quit his hedge fund cold turkey in 1969 to go into reinsurance and banking. Armed with permanent capital from the reinsurance and banking businesses, a modest amount of very low cost leverage whose availability was independent of asset values, and market multiples on performance, Buffett became even more successful than he ever was in the hedge fund business.
Hear Taussig speak about:
* How the right structure creates 10 times more Alpha
* Why and how can structural alpha generate such outsized returns?
* Why Warren Buffett stopped being a hedge fund manager in 1969
* Tax benefits
* Real life examples: Which hedge funds use banking/insurance structures?
* Steps and considerations for setting up banking / insurance vehicles to create Structural Alpha
Please use the comment feature below for your feedback, or email me at knab@opalesque.com. Thank you!
Matthias Knab Posted On Dec 23 2011
It sounds like Joe is advising hedge fund managers to start a new business as a bank or an insurance company, but at the same time (on the side?) continue to manage (at least some of?) their capital using their particular investment strategy. So the question is: what if you don't want to get into the business of banking or insurance? Am I missing something here?
