10/17/2009 05:12 am ET Updated May 25, 2011

Is Your Broker Smarter Than....Cerberus?

Cerberus Capital management describes itself as " of the world's leading private investment firms." While it is best known for its ill-advised investment in Chrysler, it also has equity positions in many sectors of the economy.

Stephen A. Feinberg, the co-founder of Cerberus, was lauded in a Business Week article as someone who had built a corporate empire with over $30 billion in sales -- bigger than McDonald's, Coca-Cola or Cisco Systems.

Cerberus' companies had more than 106,000 employees, and a larger payroll than Exxon.

Just how good is Feinberg? According to David M. Rubenstein, a co-founder of the Carlyle Group: "Feinberg may have perfected a new business model."

Mr. Rubenstein should know. The Carlyle Group is a global private equity firm with $84.5 billion of assets under management.

What if Mr. Feinberg agreed to let you into hedge funds run by Cerberus? Would you find this irresistible?

Many investors did.

Not any more. 70% of investors (representing $5.5 billion) in two of its hedge funds want to get out.

What caused these funds to falter? Bad bets on GMAC and ResCap (a residential mortgage company) were major causes.

The next time your broker or advisor tells you about a great stock or a mutual fund you should buy "now", ask him this question:

Are you better than Cerberus?

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein.

Dan Solin is the author of The Smartest Retirement Book You'll Ever Read.