Meredith Whitney's Dubious Debut

It took less than a year for Meredith Whitney’s American Revival Fund to begin unraveling. In June 2013 she published a book predicting that the central part of the U.S. would thrive while coastal states stagnated. In November her new hedge fund started investing in heartland stocks. While parts of the region did well, she made losing bets on companies including Conn’s, a retailer that sells mattresses and stereos on credit in Texas. In October she was headed for the year’s eighth monthly drop when her main backer, a fund tied to billionaire Michael Platt’s BlueCrest Capital Management, asked for its money back. Whitney’s firm refused, and BlueCrest sued. Her office on New York’s Madison Avenue is on the market, and top executives have left.

Poorly timed stock picks, starting her hedge fund without a staff of analysts to help choose investments, and relying too much on one backer’s money helped lead Whitney astray, says a person with knowledge of her firm who asked to remain anonymous discussing private matters. Robert Whitelaw, chairman of the finance department at New York University’s Stern School of Business, says a successful fund needs more than an interesting angle. “What’s a thesis? A thesis is a story,” he says. “The first thing is you may have the story wrong, and the second thing is, even if you have the story right, a lot of it is about timing.”