The beginning of a new year brings with it the promise of a fresh start and resolutions for reform. This annual ritual has ironic relevance for the hedge fund and financial industry. Clearly, the hedge fund industry would rather forget 2011 and happily begins a new performance and incentive compensation period. According to Barclay's Hedge Index, the average 2011 hedge fund return was a pitiful (5.3%). Meanwhile, many financial industry titans have renewed their pledge to continue to work as if they are gods in the face of rising investor and stakeholder contempt. This capitalistic philosophy declares that material self enrichment is the truth and of prime importance. Frequent industry and media references to financial titans as "Masters of the Universe" suggest that man is god to the financial pantheon ('of or for the gods'). This caricature was ridiculously manifest in October 2011 with Jon Corzine's Icarus-like belly flop at MF Global. Who knew MF stood for 'Missing Funds?' More than two months after its bankruptcy regulators and the bankruptcy trustee are still looking for the $1.2 billion in missing segregated client funds. No criminal prosecution has yet been initiated. The financial sector ETF (XLF) dove (17.1%) in 2011 led by the MF Global meltdown from $8.36 per share at the start of 2011 to mere pennies at year end for its carcass.
The image above shows the epic failure of Icarus from Greek mythology. He is surrounded by lamenting sea-nymphs. His father, Daedalus the craftsman, made wings out of wax so that he and his son might escape from the island of Crete. But, overcome by pride, Icarus flies too close to the sun, the wax melts, and he plunges to his death. His sensible, god fearing father flies safely to Sicily. There Daedalus hangs up his wings and builds a temple as an offering to Apollo, the god of light, the sun, and truth.
Time will tell whether the failure of MF Global was due solely to the vainglory of its CEO or whether nefarious acts were involved. Let's hope that no one places a fat thumb on the scales of justice. Let justice be served.
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