Columnist Jeff Haney: Gambling hedge fund proposal is anything but a sure bet

Wednesday, Dec. 8, 2004 | 9:30 a.m.

Jeff Haney's sports betting column appears Wednesday. Reach him at (702) 259-4041 or haney@lasvegassun.com.

At least one blackjack card counter launched a successful career as an investment banker after a colleague lured him to Wall Street by calling it the world's largest casino -- adding, "and they can't throw you out."

Poker champion Chris "Jesus" Ferguson has listed his day job as day trader -- although he evidently is a better card player than stock picker. "Poker," he once famously said, "supports my gambling habit."

It's easy to spot comparisons between Wall Street investing and Vegas-style gambling.

The seemingly disparate worlds, their terminologies and even some of their major players do tend to overlap.

You'll hear Las Vegas sports handicappers say they're "long" on the Lions, "bullish" on the Bears or "bearish" on the Bulls.

Likewise, the Master of the Universe-types in Lower Manhattan are surely devoting part of this work week to designing high-stakes college bowl-game pools.

The trouble is, before long those comparisons collapse under their own weight like so many dot-com bubbles.

The realm of Wall Street investing is vast, far-reaching; the sports betting marketplace, relatively tiny and fractured.

After a while, there really is no comparison.

That's why Mark Cuban's proposed hedge fund based on gambling is doomed, at least as a large-scale venture.

Cuban, the outspoken owner of the Dallas Mavericks of the National Basketball Association, created a stir from Wall Street to Fremont Street with his recent announcement that he plans to start a hedge fund devoted to gambling, presumably with sports betting a big part of the picture.

"It's going to be a fund that only places bets," Cuban wrote on his weblog Nov. 27. "A gambling hedge fund. ...

"It's not unusual to hear people refer to trading stocks as no different than going to Vegas. They are right. Gambling is gambling. The question is, which gives the opportunity for a better outcome?"

Readers of Cuban's blog were left to wonder whether this was a serious proposal, a deadpan parody or something in between.

"We've only briefly heard about it," said Nick Bogdanovich, sports book manager at the Golden Nugget downtown. "But I like Cuban. Obviously, he shouldn't be out on the floor yelling at the officials, but I do like how he stirs things up."

Hedge funds are private portfolios, usually for wealthy individuals, that are often riskier and less regulated than traditional investment vehicles.

With some exceptions, hedge fund managers are required to register with the Securities and Exchange Commission once the fund's assets reach $30 million.

Let's say Cuban wants to stay below that threshold and raises $20 million. Let's say the team of gamblers he hires to run the fund can achieve an edge of a few percentage points against the house -- about the best you can reasonably hope for.

To generate even a 10 percent return of $2 million in a year would require putting at least $1 million in action each week in sports bets.

That's ostensibly possible during football season, when sports books offer higher betting limits, but a pipe dream given the much lower limits on baseball and basketball.

And that doesn't take into account the fund's fees, which would likely be hefty, as Cuban plans to pay a team of "the best and the brightest" gamblers.

Nor does it take into account the fact that sharp bettors derive much of their edge from attacking weak, off-market betting lines that usually carry small limits and disappear rapidly.

"To do something like this on a very large scale sounds pie-in-the-sky," said Anthony Curtis, publisher of Huntington Press and the Las Vegas Advisor tip sheet.

"A lot of people like to draw analogies between finance and gambling, and in some ways, yeah, you can do that. But you get to the point where they're absolutely not the same thing because of the vast difference in the size of the markets."

A hedge fund open to big investors would quickly become unwieldy, Curtis said, compared with an underground sports betting syndicate or blackjack team.

"In theory, it's a really great idea," Curtis said. "Guys have been doing this for years -- groups getting together to pool their funds and make positive-expectation wagers. But I think (Cuban) is a bit naive if he thinks he's going to be able to do it on the level he's talking about."

TV football prognosticator Wayne Root was more optimistic about Cuban's proposal. Root said he spoke with Cuban recently and both men "were very interested" in pursuing the idea further.

"He came out with it publicly, but this is something I've been talking about for five years," said Root, a Henderson resident. "I find the idea of starting a sports betting mutual fund, or hedge fund, very exciting."

To move ample amounts of money in the sports betting market, Root acknowledged, would probably require dealing with offshore or foreign bookmakers -- a legal gray area. One solution, Root said, would be to target international investors.

"You could set up an offshore hedge fund and attract global investors rather than people from the U.S.," Root said. "But you would need a legitimate operator to do it. I think Cuban will legitimize it more than I could."

It might just be a trial balloon, and it's certainly a long shot, but the Golden Nugget's Bogdanovich wasn't ready to dismiss Cuban's proposal out of hand.

"I like the way he thinks," Bogdanovich said.

"He's young, he's aggressive. If he thinks he's come up with something, hey, why not?"

Stardust Invitational

Brent Carter advanced to the final round of the $10,000 Stardust Invitational football handicapping contest by defeating veteran oddsmaker Jimmy Vaccaro this past weekend.

Carter went 4-1-2 in his seven selections and Vaccaro finished 2-4-1.

At 9 p.m. Friday at the Stardust race and sports book, Big Al McMordie and Mike Orkin meet in the other semifinal to determine Carter's opponent in the final, which is set for Dec. 17.