Lampert, Wood Reveal Failings of `Concentrated' Hedge-Fund Bets

``These concentrated funds scare the hell out of me,'' said Brad Alford, head of Alpha Capital Management LLC, an investment consultant based in Atlanta. ``Either the manager knocks it out of the park or he strikes out.''

Other managers who follow the approach of betting big on out- of-favor stocks are also struggling as market volatility hits historic highs. Edward Lampert's ESL Investments Inc. dropped 27 percent last year and an additional 1.3 percent in the first three months of 2008, investors said. The 45-year-old Lampert, who oversees $17.5 billion, has been hurt primarily by a $6.1 billion stake in retailer Sears Holdings Corp. of Hoffman Estates, Illinois, that has fallen 48 percent in the past year.