Friday, December 8, 2017

Friday Feature Book Review: More Money Than God! (Hedge Fund Kings) by Sebastian Mallaby ヘッジファンド ―投資家たちの野望と興亡: セバスチャン・マラビー

Global hedge funds pay big time bonuses. Bonus money big enough to become a billionaire. If you want to know the wealth & power around them, then this book is for you. Author Sebastian Mallaby, has amazing access to top-tier hedge fund players. He does some really incredible research into this exclusive"Titans of Finance" style of industry. The names and numbers really made sense and hooked me in. It is from a few years ago when the industry was near its peak, but it still ignites envious bonus envy for the majority of professionals who only dream of millions, not hundreds of millions come bonus day.

He did not waste my time or my money on this very rich in detail volume that really give you a full meal of satisfying insight. This was one of the most in depth books on hedge funds that I have ever come across. The direct quotes and input from the greatest managers of all-time make it work. Their views on many of the biggest trades the world has ever seen, was very educational in its remarkable detail. It is not one man's thoughts. It is one man's great collection of quotes from the traders who have made the big money. Those are the traders I want to hear it "direct from the gut" from anyway. The author stays out of the way, and allows you to absorb it all. 

You could feel that he not only developed excellent sources, but wished that you could have been there for the many of the conversations. For me, not a single page was drab. Every single line was worth my full attention. The wrap up on the industry in a big picture style worked for me too at the end. The author can really connect the dots perfectly. It many ways, he makes a good case that global investment banks were in fact, hedge fund partnerships themselves, but then got listed on various stock exchanges. A new wave of hedge funds will always come along to make money out of a never ending pattern of continuous market opportunities. Financial markets, like the sea itself, is never static. It is constantly moving in various directions.

The overall bigger picture is easy enough to understand, hedge funds evolve and adapt. The best ones grow and keep the kind of DNA that keeps on tinkering, like any inventor in a garage. They have to keep looking for the next new thing, new market, new strategy, new arbitrage, Bitcoin trade or whatever. Size matters, and institutional investors tend to look for asset size as a kind of comfort with hedge funds. Over time this can be flawed in many ways, but it is still an all too common practice. In a way, you get deja vu and hear that the old line, "nobody got fired for choosing IBM" , it works here too with large size hedge funds. 

On the surface, a very large and well established hedge fund with US$1BN or more in assets, seems safe as an investment. however, the financial size is not really a comfort in the end, as the performance can end quickly. It is the professionals, the real human capital, within any hedge fund that are the real assets being invested into. If the real IP, the brain power that these traders have, can figure out the next new thing in financial markets, then top tier performance follows for all investors. 

Ultimately, any hedge fund once successful, gets big. A few even get listed. and then make way for a newer wave of "Young Turks" to follow with the new new market sensation. Hedge funds really are about finding opportunities and the people behind them. That is where the big money is made, by seeing a new twist or tact, and creating profits by innovation around those new opportunities. These successes often come in waves and that reflect different strategies doing better or worse in different cycles.

The Top 3 Takeaways from this book that impact any reader are:

1) Never be between a central bank making a wrong move and a full conviction hedge fund. Take George Soros and the Bank of England, it did not end well for the UK pound or the BOE. Always best to get out of the way when the big boys bet in size! 
2) A great observation was the comparison of Goldman Sachs when seeing their client Long Term Capital Management failing. It was like " a hyena feeding on a trapped but living antelope"! You gotta love that image of your helpful prime brokerage "partner"!
3) Winning and losing is very black and white. When a dejected trader says " I just want to kill myself" Hedge Fund founder Michael Steinhardt just asks "can I watch?". Such is the overall sympathy from deep within the hedge fund beast. 

The author Sebastian Mallaby takes us on this journey in a very detailed fashion. It is full of the kind of glitz and bling from the big personalities that feel they certainly earned their big bonuses. It all keeps many of these things in a kind of fantasy land for the many others lower down in the financial income scale. At least it keeps your appetite always wanting a little bit more. This was a great read and a great insight in the hedge fund world. This book is Highly Recommended!

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