Chess Business
(Continued from page 37) was picked up in the broader financial media, in part due to their provocative name. We have requested basic documents (such as Form 99 which contains important dis- closures required by the State of New York) but the company did not have them at their disposal. The fund claims its general partner,
who appears to be a single trader by the name Victor Plotkin, has an exceptional 18 year track record. That track record, if accurate, is arguably
the best track record in the history of hedge fund investing. It is far superior to Buffet or Renaissance Technologies. This record, which GHF places alongside major stock indices for comparison in a Power Point marketing presentation, boasts 18 years with a 39% average annual return. The worst year was a negative 5% (2008),
the only negative annual reported return. To believe these numbers a competent
investor (or “smart money” or other “geniuses”) would likely want to see an independent audit. Besides being con- cerned about the seemingly too-good- to-be-true purported results, a prospec- tive investor would want to know:
• How many assets (if any) was Plotkin managing when he produced these returns?
• That GHF was not selecting some accounts to include some while ignoring others (“cherry-picking”), including those that redeemed along the way (“survivor bias”).
• If Plotkin had any other money he was managing during the time frame under a different (e.g., opposite) strategy, how many such funds were there and how did those perform?
• That the track record ties to real money at real bank and brokerage accounts and is not merely a back- testing “simulation” of a strategy.
They should also want more of a biog-
raphy and references of Plotkin that can be independently verified. Plotkin says he has 21 years of investment experience (although we can't identify relevant employment), 18 of which was purportedly implementing the world's best investment strategy. Apparently Victor made all his rookie investment mistakes in the first few years. By year four he was done learn- ing and ready to start earning. If true, he truly is a genius. Most profes-
sional investors will struggle for 10 years and make many mistakes to get to compe- tency. And none of them could individually produce half the track record shown here. Another nagging question is why his
partners, who seem to function more as promotors than being integral to the investment process, have no nexus into Plotkin's strategy. Alex said he did not know how the strategy worked. Caro's office, where GHF is one of several busi- nesses, is apparently not the place where the investments are made by Plotkin. The current fund reportedly has $1
million under management. There is also a reported $30 million that is from or in Israel that is being managed. Is the $30 million being managed by GHF or by Plotkin in some other capacity? Can he show it really exists? An investor would also want to know
where the trading and investment records are kept, who administers the funds, computes returns for investors (particu- larly for purposes of the 25% incentive fee), and who audits the funds. Can GHF provide this information? Although Genius was not able to provide
its Form 99, we were able to obtain a copy from the New York Attorney General’s office. In addition, we obtained a 90+ page advertising circular intended for potential investors. In the end, we collected all our concerns into one final e-mail that we sent to Alex, to give him and his partners the maximum opportunity to respond.
RABINOVICH PLAYS ON THE BOARD
Queen’s Gambit Declined, Exchange Variation (D36) Garry Kasparov Alexander Rabinovich Tel Aviv, Israel, 1994
1. d4 d5 2. c4 c6 3. Nf3 Nf6 4. Nc3 e6 5. cxd5 exd5 6. Qc2 Be7 7. Bg5 Nbd7 8. e3 0-0 9. Bd3 Re8 10. h3 Nf8 11. Bf4 Ne6 12. Bh2 Bd6 13. Bxd6 Qxd6 14. 0-0 g6 15. Rab1 a5 16. a3 Ng7 17. b4 axb4 18. axb4 Bf5 19. Rfc1 Bxd3 20. Qxd3 Ne4 21. b5 Ra3 22. Nd2 f5 23. bxc6 bxc6 24. Ncxe4 fxe4 25. Qc2 Rc8 26. Rb7 Ne6 27. Qb2 Ra6 28. Nb3 Raa8 29. Nc5 Rab8 30. Nxe6 Rxb7 31. Qxb7 Qxe6 32. Rc2 Qe8 33. Rc3 Qe6 34. Rc1 Qe8 35. Ra1 Rb8 36. Qc7 Ra8 37. Rxa8 Qxa8 38. Qd7 Qa4 39. Kh2 Qb5 40. Kg3 Qc4 41. Qe8+ Kg7 42. Qe7+ Kg8 43. Qf6 Qb5 44. h4 Qb8+ 45. Kg4 Qc8+ 46. Kg5 Qd7 47. Kh6 Qc7 48. f4 Qf7 49. Qe5 Qf8+ 50. Kg5 Qd8+ 51. Qf6 Qd7 52. g4 Qf7 53. Qxf7+ Kxf7 54. f5 c5 55. dxc5 d4 56. c6 dxe3 57. fxg6+ hxg6 58. c7 e2 59. c8=Q e1=Q 60. Qd7+ Kf8 61. Kxg6, Black resigned.
40 Chess Life — July 2011
04/26/2011 Dear Mr. Rabinovich,
Thank you for your response, unfortunately our investigation of Genius Fund, L.P. has turned up a number of red flags.
I am aware that
you feel this is just for a “chess magazine,” but because of Genius’ heavy reliance on chess in its marketing, you place your business firmly in our area of expertise.
Post Bernie Madoff, no serious journalistic entity can do a profile of a hedge fund without first asking some basic questions, questions you appear unwilling or unable to answer. Anything less would be a disservice to our readers, and might actually leave us open to claims of negligence if Genius were to turn out to be less than advertised.
Specifically, we are skeptical of your claims of historical returns. We have obtained documents produced by your business, and retained an expert on hedge funds to review them. We have also investigated Mr. Plotkin’s claims that he manages 30 million dollars in Israel, with returns that even you described as “better than Warren Buffet.”
We want to understand the basis for your advertised returns.
We are happy to allow you to present tangible, hard proof that the returns you tout to investors are in fact legitimate, that Plotkin does in fact control the funds that he purports, with the results you claim. What is the name of this “sister fund”? What bank does it use? We would require specific, documented proof of your claims. In lieu of this however, you can expect a negative piece to appear in our publication.
It would in no way infringe on any trade advantages you claim to have, you have to at the bare minimum provide proof of returns.
Although you claim that you can’t find your Form 99, we were able to obtain it from the New York Attorney General, as well as your offering circular. We note that it is an unusual document, for example it doesn’t list any service providers: lawyers, auditors, bank or identification of prime brokers. Again, if you would care to provide this infor- mation, for both Genius Fund L.P. and it’s “sister fund”, we would be happy to revisit our opinion.
uschess.org
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