Cerberus Capital management describes itself as "...one 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?
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Dan Solin is the author of The Smartest Retirement Book You'll Ever Read.