Cerberus's investors feel some pain

In the midst of an ailing US economy in the early 1990s, Cerberus Capital Management, L.P. got its start. And yes, the firm found many undervalued opportunities – and made a bundle. Actually, today Cerberus has holdings with aggregate annual revenues in excess of $100 billion.

So, in the current environment, Cerberus should be doing fine, right? Not necessarily. According to a story in Bloomberg.com, Cerberus's latest fund – called Series Four -- is down 1% since November 2006.

And it makes sense. If anything, Cerberus has been early in a variety investments. It also looks like the firm has diverged somewhat from its core-value approach.

Oh, and of course, Cerberus invested in iffy deals like Chrysler LLC and GMAC LLC.

True, Cerberus does take a disciplined approach to portfolio allocation – with no more than 5% of a fund in a particular deal.

However, such amounts can still be material – especially in a low-return environment. After all, there is still little clarity in the auto and mortgage markets right now.