Love and Marriage, Hedge-Fund Style

Ryan on the soap opera “All My Children” got it all wrong when he compared love with a hedge fund, according to Drinky McDiligence, writing on the Long or Short Capital blog. McDiligence noted a recent New York Times article about how references to hedge funds, those investment pools reserved for institutional investors and the wealthy, are creeping into the popular culture. That article discussed an overwrought bit of TV dialogue in which Ryan told Kendall, ‘’Love isn’t like a hedge fund, you know?”
“Obviously, the writers have no idea what a hedge fund is,” McDiligence sniffed in his blog post. “What they should say is that love isn’t like a non-diversified traditional long-only fund.”
He explains (sort of):
"In reality, love is exactly like a hedge fund. Love is a limited partnership structure — it takes a large initial investment, and is largely unregulated. Frequently, it uses an aggressive strategy, relying on large directional bets and substantial amounts of leverage. The plan is to generate significant alpha (using the Lipper Love Average as a benchmark) but it is not uncommon to see a hedge fund or a love relationship with an unsuitably low Sortino ratio, indicating that it has strayed from it’s raison d’etre."
McDiligence even includes a graph, whose shape would be familiar to any securities analyst, suggesting that a pre-nuptial agreement can work like a “put” option for the wary husband- or bride-to-be. “It floors your downside, and there is unlimited upside,” the post reads. “If the love falters or a better substitute arrives, you can walk away with no marginal pain.”
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