In the waning days of the second millennium of the Common Era I found myself in Austin, Texas advising a hedge fund in the charge-off receivables industry. There was no way I could know that within five years I would be running my own hedge fund and then a second. There was no way I could foresee my responsibility in a suicide and the contemplation of my own.
It started in the most unassuming way. Via letter I was introduced to the charge-off receivables industry by a Tennessee hedge fund that used a Texas firm to handle their collections. The hedge fund put me up at a 5-star hotel on a PGA golf course. I wasn’t impressed by the largesse. I prefer more Spartan living even when traveling.
The charge-off receivables industry is a dirty business. Charge-off receivables are delinquent debt sold to a third party for pennies on the dollar. As an example, credit card accounts 180 past due require banks to either book a 100% loss on the account or sell the bad debt, whereas, they can use the sale price as a partial offset.