Hedge Fund Would Take a Gamble With Assets
To get a fair shake with your investment dollars, forget Wall Street. Head for the Las Vegas Strip.
So says billionaire Mark Cuban. The colorful owner of the Dallas Mavericks NBA team, who got rich in the dot-com stock boom, plans to launch a hedge fund that would literally be a gamble.
Instead of picking stocks, a team of money managers hired by Cuban would bet the fund’s assets through legal gaming venues, such as sports books and horse racing tracks. If they bet wisely, investors will reap the benefits.
“It’s not unusual to hear people refer to trading stocks as no different than going to Vegas,” Cuban wrote on his Web log last weekend. “They are right. Gambling is gambling.
“The question really is, which gives the opportunity for a better outcome?”
Cuban, who said he had been investing in the stock market for 15 years, describes Wall Street as a place where many people don’t play by the rules and where the regulators don’t enforce the rules -- a reference to the many scandals that have tarnished securities markets in recent years.
By contrast, he said, in legal gambling “you know without question the house is going to play by the rules.”
Another big lure, Cuban explained, is that the odds are rarely a secret in gambling. The challenge would be to make the best use of all the information that goes into determining those odds and to bet intelligently rather than emotionally, he said.
“We would look for opportunities in the market where we could gain an advantage,” Cuban said in an e-mail interview. “It could be anything from a game of chance to a horse race to who knows what. The key is that the information is better and more available” than what most investors can expect in researching stocks, he said.
Cuban, 46, said the fund’s launch was a year away, and he didn’t provide specifics on how it would work or what kind of investors it might attract. Hedge funds are largely unregulated, secretive portfolios that typically cater to wealthy investors.
As one of the NBA’s most outspoken owners, Cuban is no stranger to controversy. But any proposal that mixes the businesses of gambling and pro sports is particularly touchy. An NBA spokesman said Tuesday that the league had just seen Cuban’s idea and was “still studying it.”
“It won’t be me figuring out what bets to place or games to play,” Cuban said in his blog. “I will find the best and the brightest with a confirmable track record and hire them.”
E. Lee Hennessee, who heads hedge-fund tracker Hennessee Group in New York, said Cuban’s concept of dissecting betting odds appeared to be rooted in a discipline common in the fund industry: “Everybody starts with a statistical basis,” she said.
Cuban said early reaction to his posting had been positive. “I wrote it to see how people would respond and respond they have!”
