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More Money Than God: Hedge Funds and the Making of a New Elite
Based on author Sebastian Mallaby's unprecedented access to the industry, including three hundred hours of interviews, More Money Than God tells the inside story of hedge funds, from their origins in the 1960s and 1970s to their role in the financial crisis of 2007-2009.
Wealthy, powerful, and potentially dangerous, hedge fund moguls have become the It Boys of twenty-first century capitalism. Ken Griffin of Citadel started out trading convertible bonds from his dorm room at Harvard. Julian Robertson staffed his hedge fund with college athletes half his age, then he flew them to various retreats in the Rockies and raced them up the mountains. Paul Tudor Jones posed for a magazine photograph next to a killer shark and happily declared that a 1929-style crash would be "total rock-and-roll" for him. Michael Steinhardt was capable of reducing underlings to sobs. "All I want to do is kill myself," one said. "Can I watch?" Steinhardt responded.
Finance professors have long argued that beating the market is impossible, and yet drawing on insights from physics, economics, and psychology, these titans have cracked the market's mysteries and gone on to earn fortunes. Their innovation has transformed the world, spawning new markets in exotic financial instruments and rewriting the rules of capitalism.
More than just a history, More Money Than God is a window on tomorrow's financial system. Hedge funds have been left for dead after past financial panics: After the stock market rout of the early 1970s, after the bond market bloodbath of 1994, after the collapse of Long Term Capital Management in 1998, and yet again after the dot-com crash in 2000. Each time, hedge funds have proved to be survivors, and it would be wrong to bet against them now. Banks such as CitiGroup, brokers such as Bear Stearns and Lehman Brothers, home lenders such as Fannie Mae and Freddie Mac, insurers such as AIG, and money market funds run by giants such as Fidelity-all have failed or been bailed out. But the hedge fund industry has survived the test of 2008 far better than its rivals. The future of finance lies in the history of hedge funds.
Wealthy, powerful, and potentially dangerous, hedge fund moguls have become the It Boys of twenty-first century capitalism. Ken Griffin of Citadel started out trading convertible bonds from his dorm room at Harvard. Julian Robertson staffed his hedge fund with college athletes half his age, then he flew them to various retreats in the Rockies and raced them up the mountains. Paul Tudor Jones posed for a magazine photograph next to a killer shark and happily declared that a 1929-style crash would be "total rock-and-roll" for him. Michael Steinhardt was capable of reducing underlings to sobs. "All I want to do is kill myself," one said. "Can I watch?" Steinhardt responded.
Finance professors have long argued that beating the market is impossible, and yet drawing on insights from physics, economics, and psychology, these titans have cracked the market's mysteries and gone on to earn fortunes. Their innovation has transformed the world, spawning new markets in exotic financial instruments and rewriting the rules of capitalism.
More than just a history, More Money Than God is a window on tomorrow's financial system. Hedge funds have been left for dead after past financial panics: After the stock market rout of the early 1970s, after the bond market bloodbath of 1994, after the collapse of Long Term Capital Management in 1998, and yet again after the dot-com crash in 2000. Each time, hedge funds have proved to be survivors, and it would be wrong to bet against them now. Banks such as CitiGroup, brokers such as Bear Stearns and Lehman Brothers, home lenders such as Fannie Mae and Freddie Mac, insurers such as AIG, and money market funds run by giants such as Fidelity-all have failed or been bailed out. But the hedge fund industry has survived the test of 2008 far better than its rivals. The future of finance lies in the history of hedge funds.
496 pages, Hardcover
First published January 1, 2010
About the author
Sebastian Mallaby
10 books216 followersA Washington Post columnist since 1999. Worked for The Economist from 1986 - 1999.
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April 12, 2015
More Money Than God was one of the most educational and interesting finance books I've read. Mallaby has really done his homework here, and it shows. The history of hedge funds, by the very nature of hedge funds, gives a lot of general market history as well, and I often found myself realizing that Mallaby was telling of market incidents that I'd read about in other books. In that sense, this was a very high-level overview to both hedge funds and markets. This is a very holistic text. Not only that, but it is written as a pageturner, or as much of a pageturner as you can make a history of hedge funds. The 389 pages of main body text went by relatively quickly, and I was never bored or considering putting the book down.
I took away a few useful bits of information from this book. Hedge funds, despite their bad reputation, are actually often better for the economy than big banks with proprietary trading desks (though prop trading isn't done much anymore, partially because of the Volcker Rule) because hedge funds are smaller and don't have the resources of big banks and the government to bail them out if they fail. Hedge funds are kind of like the startups of the finance world. They are often using a significant amount of their founders' and employees' capital, meaning that they have their own skin in the game and are less likely to take gigantic, stupid risks like some banks did in 2007 which led to the mortgage crisis. Also, the book explained the gaps in the efficient-market hypothesis, or idea that every stock is accurately priced because investors have digested information. In the long term, the EM hypothesis is true, but in the short to medium term, it often isn't because it takes time for all investors to find and react to information. Thus, there is money to be made in investing, despite what some people say. Mallaby gets into this a great deal in the book. The bottom line that I concluded about beating the market is that it can be done, and will be done, and when it happens, the firm that does it first will make a killing until other firms begin to imitate, drive the market to saturation, and take away the opportunity to beat the market. Then, another new method will come about, and the process will repeat each other. Thus, a good hedge fund will always be innovating and finding new opportunities before others do. Another sad truth about hedge funds is that they often fall victim to their own success: once reaching a certain huge size, their positions will be so big that they will control entire markets, meaning that if they want to buy or sell they may not be able to at all, or without making a huge impact on market prices, which defeats the purpose.
Thus, the ideal hedge fund would be one financed with founders' money, so they wouldn't take unnecessary risks, that was small enough to not take over markets, and low-key enough that no one was emulating its strategies, which would work well if they are not being copied by everyone else. So, though Mallaby doesn't get into this, perhaps there are a lot of small hedge funds that remain small and refuse to disclose anything about themselves because doing so is the only way that they can continue to beat the market.
I took away a few useful bits of information from this book. Hedge funds, despite their bad reputation, are actually often better for the economy than big banks with proprietary trading desks (though prop trading isn't done much anymore, partially because of the Volcker Rule) because hedge funds are smaller and don't have the resources of big banks and the government to bail them out if they fail. Hedge funds are kind of like the startups of the finance world. They are often using a significant amount of their founders' and employees' capital, meaning that they have their own skin in the game and are less likely to take gigantic, stupid risks like some banks did in 2007 which led to the mortgage crisis. Also, the book explained the gaps in the efficient-market hypothesis, or idea that every stock is accurately priced because investors have digested information. In the long term, the EM hypothesis is true, but in the short to medium term, it often isn't because it takes time for all investors to find and react to information. Thus, there is money to be made in investing, despite what some people say. Mallaby gets into this a great deal in the book. The bottom line that I concluded about beating the market is that it can be done, and will be done, and when it happens, the firm that does it first will make a killing until other firms begin to imitate, drive the market to saturation, and take away the opportunity to beat the market. Then, another new method will come about, and the process will repeat each other. Thus, a good hedge fund will always be innovating and finding new opportunities before others do. Another sad truth about hedge funds is that they often fall victim to their own success: once reaching a certain huge size, their positions will be so big that they will control entire markets, meaning that if they want to buy or sell they may not be able to at all, or without making a huge impact on market prices, which defeats the purpose.
Thus, the ideal hedge fund would be one financed with founders' money, so they wouldn't take unnecessary risks, that was small enough to not take over markets, and low-key enough that no one was emulating its strategies, which would work well if they are not being copied by everyone else. So, though Mallaby doesn't get into this, perhaps there are a lot of small hedge funds that remain small and refuse to disclose anything about themselves because doing so is the only way that they can continue to beat the market.
December 16, 2015
Mallaby not only presents the definitive history of hedge funds, starting with the first one (created by A.W. Jones in 1949), and continuing through the recent financial crisis, but he also makes the argument that hedge funds are the best alternative to the megabanks on Wall Street.
That's a pretty controversial claim. Certain funds (like Long-Term Capital Management) have completely imploded, and some hedge fund managers have been fined for fraud. And yet, after reading this book, I'm sympathetic to Mallaby's case. He argues that hedge funds:
1) Include their manager's own money in the fund (most of the time)
2) Haven't taken taxpayer money in bailouts when they fail
3) Shine a light on fraudulent and incompetent companies through short-selling their stock
4) Have an entrepreneurial, startup spirit
It's a testament to the merit of Mallaby's book that I now have some sympathy for financial traders. Up to this point, the books I've read about Wall Street have all been scathing. This one takes an approach of measured praise.
That's a pretty controversial claim. Certain funds (like Long-Term Capital Management) have completely imploded, and some hedge fund managers have been fined for fraud. And yet, after reading this book, I'm sympathetic to Mallaby's case. He argues that hedge funds:
1) Include their manager's own money in the fund (most of the time)
2) Haven't taken taxpayer money in bailouts when they fail
3) Shine a light on fraudulent and incompetent companies through short-selling their stock
4) Have an entrepreneurial, startup spirit
It's a testament to the merit of Mallaby's book that I now have some sympathy for financial traders. Up to this point, the books I've read about Wall Street have all been scathing. This one takes an approach of measured praise.
February 1, 2021
Despite a spicy title, one of the few books where I've no notes to share. Reason? Unlike the Ivy League teams heading investment banks, a hedge fund is usually the brainchild of one highly charismatic individual with a uniquely aggressive trading ethos. Or so the book claims, focusing solely on Soros' Quantum, Robertson's Tiger, and Meriwether's LTCM. Nil is said about the hundreds of other funds aggregating gazillions into highly leveraged securities, or any beans spilled on their trading strategies. In short, a book about a few oranges... but nothing about the juice.
October 24, 2021
As an economic student enrolled at university I often found that the theories of economics seldom managed to predict anything (with the exception of austrian economics (which wasnt taught at university)). By writing the history of hedge funds its author thereby shows the flaws of traditional finance which hedge fund managed to make their money. Sebastian mallaby manages to make an aspect history of finance interesting by focusing on the individual hedge fund managers. It gives the reader a deeper understanding of what hedge fonds do (although not all of them actually hedge risk as it turns out).
According to traditional financial theory, the stock market prices evolve according to a random walk (so price changes are random) and thus cannot be predicted. Hedge fund managers however make their living doing just that and after the crash of 1987 the traditional view was finally falisified (which left me wondering why I studied these quaint theories at all). What drew me to this book was the contrarian nature of many managers and the huge risks involved. The success story is often centered around managers who take huge bets (albeit calculated ones) against the market and end up making 'the killing of a lifetime' (to quote Soros).
Mallaby does not romanticize the role of the hedge funds and discusses both the pros and cons of their existence. I would recommend this book to anyone with an interest in financial history and the actual mechanics of how fonds manage to beat markets.
According to traditional financial theory, the stock market prices evolve according to a random walk (so price changes are random) and thus cannot be predicted. Hedge fund managers however make their living doing just that and after the crash of 1987 the traditional view was finally falisified (which left me wondering why I studied these quaint theories at all). What drew me to this book was the contrarian nature of many managers and the huge risks involved. The success story is often centered around managers who take huge bets (albeit calculated ones) against the market and end up making 'the killing of a lifetime' (to quote Soros).
Mallaby does not romanticize the role of the hedge funds and discusses both the pros and cons of their existence. I would recommend this book to anyone with an interest in financial history and the actual mechanics of how fonds manage to beat markets.
July 24, 2011
In 1949, an American sociologist and a former diplomat and anti-Nazi operative decided to get rich. He organized a "hedged [sic] fund" that bought shares in the companies he deemed promising, and sold short shares in the companies he deemed unpromising, doing all this on borrowed money. The top marginal income tax rate at the time being 91%, he took 20% of the profits on the investments, which were taxed at the much lower capital gains rate of 25%. If all of the original $100,000 had stayed with him, he would have increased it to $5 million by 1966. Hedge funds multiplied in the 1960s, burned in the subsequent market crashes, and have persisted to this day; now they manage a total of over a trillion dollars. In addition to equities, they now bet on prices for all sorts of assets. In 1992 George Soros bet on the British pound to drop against the European Exchange Rate Mechanism (the precursor to the euro); in the devaluation, he made £1 billion at the expense of the British taxpayer. In 1997 Soros bet on the Thai baht to devalue; he was reluctant to bet as much as he could, since if the Thai government's foreign currency reserves were exhausted, this would plunge millions of Thais into abject poverty. The baht did devalue, the economy of Thailand did crash, and Soros did make money (but he lost money on the Indonesian rupiah). In the early 1990s, the U.S. Federal Reserve tried to stimulate the economy by having very low short-term interest rates, so businesses could refinance their debt and hire more workers; a hedge fund borrowed short-term and lent long-term, with only a fraction of the reserves that a normal bank would have to have. In the early 1970s, the Nixon administration imposed price controls, among other things, on plywood; a hedge fund manager saw that the controls would soon have to be abandoned, and made a lot of money on plywood futures. There are lots of stories like that in this book. These people did make more money than God. Who lost it? Ordinary unsophisticated investors, taxpayers of different countries, and people who trusted their governments. Yet with all their faults, hedge funds are not too big to fail; they won't be bailed out by the government, and their managers know it; the managers usually have their own money in the fund, and thus are not gambling with other people's money.
September 1, 2018
MMTG provides an insider's take on the history of hedge funds using language that is appealing to the outsider. Sebastian Mallaby presents colorful characterizations ("[Robert Mercer] never recalled having a nightmare") of the major players behind some of the largest financial undertakings you have never heard about. Extremely detailed research is reduced to a cascade of brilliance--a triumph of tight editing. Sebastian introduces new ideas and debates criticisms without ever skirting myopia. The LTCM and Quantum (George Soros) chapters are especially good, but reading any less than the entire book would be doing yourself a disservice. And this is coming from someone who took three years to finish reading it.
One of my favorite extractions from the novel is that the author Tom Wolfe invested in The Tiger Fund and used his experience with writing the book The Right Stuff to convince a Goldman Sachs analyst, whose father was an aviator, to jump ship to Tiger. This is interesting to me because Tom also wrote The Bonfire of the Vanities, which was a work of satire criticizing 1980s New York with the main character being a bond trader. I can't help but wonder how Tom's criticism would play out in an era where one or two hedge funds collaborating closely could destabilize an entire country.
See this review and others on my blog
One of my favorite extractions from the novel is that the author Tom Wolfe invested in The Tiger Fund and used his experience with writing the book The Right Stuff to convince a Goldman Sachs analyst, whose father was an aviator, to jump ship to Tiger. This is interesting to me because Tom also wrote The Bonfire of the Vanities, which was a work of satire criticizing 1980s New York with the main character being a bond trader. I can't help but wonder how Tom's criticism would play out in an era where one or two hedge funds collaborating closely could destabilize an entire country.
See this review and others on my blog
October 1, 2016
If there was an option to give a book 6 stars I would have given it. The writer has made an extraordinary effort which is clear from every single page. He clearly understood the strategies employed by the hedge fund managers which he explained while at the same time made the book entertaining and enjoyable. I read certain segments multiple times, made notes and revised my notes to ensure I don't miss a single important insight. I am familiar with many of the characters mentioned in the book but the chronological sequence put things in a much better perspective.
Only negative in my opinion is that to fully comprehend the strategies a person needs to have a decent amount of experience in finance. CFA Charterholders will be at an advantage for the broad amount of knowledge the curriculum provides.
Only negative in my opinion is that to fully comprehend the strategies a person needs to have a decent amount of experience in finance. CFA Charterholders will be at an advantage for the broad amount of knowledge the curriculum provides.
April 11, 2014
This was one of the best descriptions of how the financial system makes money that I have read. This could stem from the fact that it built on top of the earlier information I had, but, in any event, I came away from this book with a much clearer understanding of the workings of the stock market than I had before, and I actually went back and re-read some things I had read earlier and they made more sense.
The author is quite in favor of hedge funds. I'll stop short of saying he is in thrall, but it at least crossed my mind.
His point is a fair one- hedge funds are real, unfettered capitalism, that you get the benefits of a large instituional investment bank with much less of the moral hazard. Hedge funds create wealth (like investment banks), their traders get paid a significant cut of their earnings (less like an investment bank) and no independent hedge fund has ever been bailed out using taxpayer money (entirely unlike investment banks). The last ponit is a bit of a stickler- hedge funds that were started within investment banks have collapsed, bringing down banks themselves (Bear Stearns for example), but the author's contention is that these don't count as true hedge funds, as they always had the de facto backing of their parent banks, and they were really just a way for these banks to sell their services to large investors at ever-increasing buy-in amounts. It's a fair point given that, apart from the cost to buy-in it's difficult to discern a difference between the parent investment bank and the child hedge fund. So the 'moral hazard' of taxpayer reimbursement of bad decisions is not in play for hedge funds. I'll leave the discussion of the other moral hazards of the financial industry to the reader. (As does the author).
The book starts with the origin of hedge funds. Originally, they were called 'hedged' funds, as they hedged their positions and borrowed to increase profit, back in the 1950s. Eventually, they dropped both the 'd' (and the actual hedging), and became 'hedge funds.'
During the 70s and into the 80s, a sizable chunk of profits seemed to come from knowing about trades before they officially happened. This overt practice gradually went away (though was the progenitor of the high speed trading issue that broke with Michael Lewis' latest book, and was practiced by any trading entity that could do so- technically illegal, of course, so no one admits to it), but without the hedging, much of the profits came from the concept of asymmetric risk, a simple idea that is difficult to identify in reality. Those that did, prospered. Many did not and failed. Some identified it in a vacuum, then found themselves to large to get in and out of trades fast enough. This speaks to the never ending problem besetting all trading entities: you make a lot of money, then, because you now have so much money you make too much of an impact on the prices of what you buy and sell, leaving you unable to buy and sell as fast as you want. Then you have a 'liquidity' problem, and your competitors take you apart.
The takeaway I got from this book was the primacy of information. It surprises precisely no one that hubris swaggers through the hedge fund industry. Many of the titans have been brought low by people simply figuring out which trades they were making and making them as well. Some enver spoke about their secret sauces; others published a monthly newsletter (this is basically what killed Tiger; it's much easier to spot your competitors patterns when he publishes a list of trades every month). Everyone is operating under incomplete information conditions; if your informations is slightly less incomplete, you can turn that into an advantage.
This is a fun book, an easy read and definitely worth reading if you want to know more about the financial industry. You'll learn a bunch and not even realize it.
One final note- I was staggered by the change in scale in a decade and a half- in 1992 Soros broke the pound sterling by going in with $10B (others followed). He couldn't buy more when he tried (tragically, he only made $1B in that deal). Just before the mortgage crisis, Michael Lewis details an investor dropping $25B against CDOs and the market not flinching. I understand that currency speculation and aggregated mortgages are not identical, but the spike in scale is shocking to me.
Owen Gardner Finnegan
The author is quite in favor of hedge funds. I'll stop short of saying he is in thrall, but it at least crossed my mind.
His point is a fair one- hedge funds are real, unfettered capitalism, that you get the benefits of a large instituional investment bank with much less of the moral hazard. Hedge funds create wealth (like investment banks), their traders get paid a significant cut of their earnings (less like an investment bank) and no independent hedge fund has ever been bailed out using taxpayer money (entirely unlike investment banks). The last ponit is a bit of a stickler- hedge funds that were started within investment banks have collapsed, bringing down banks themselves (Bear Stearns for example), but the author's contention is that these don't count as true hedge funds, as they always had the de facto backing of their parent banks, and they were really just a way for these banks to sell their services to large investors at ever-increasing buy-in amounts. It's a fair point given that, apart from the cost to buy-in it's difficult to discern a difference between the parent investment bank and the child hedge fund. So the 'moral hazard' of taxpayer reimbursement of bad decisions is not in play for hedge funds. I'll leave the discussion of the other moral hazards of the financial industry to the reader. (As does the author).
The book starts with the origin of hedge funds. Originally, they were called 'hedged' funds, as they hedged their positions and borrowed to increase profit, back in the 1950s. Eventually, they dropped both the 'd' (and the actual hedging), and became 'hedge funds.'
During the 70s and into the 80s, a sizable chunk of profits seemed to come from knowing about trades before they officially happened. This overt practice gradually went away (though was the progenitor of the high speed trading issue that broke with Michael Lewis' latest book, and was practiced by any trading entity that could do so- technically illegal, of course, so no one admits to it), but without the hedging, much of the profits came from the concept of asymmetric risk, a simple idea that is difficult to identify in reality. Those that did, prospered. Many did not and failed. Some identified it in a vacuum, then found themselves to large to get in and out of trades fast enough. This speaks to the never ending problem besetting all trading entities: you make a lot of money, then, because you now have so much money you make too much of an impact on the prices of what you buy and sell, leaving you unable to buy and sell as fast as you want. Then you have a 'liquidity' problem, and your competitors take you apart.
The takeaway I got from this book was the primacy of information. It surprises precisely no one that hubris swaggers through the hedge fund industry. Many of the titans have been brought low by people simply figuring out which trades they were making and making them as well. Some enver spoke about their secret sauces; others published a monthly newsletter (this is basically what killed Tiger; it's much easier to spot your competitors patterns when he publishes a list of trades every month). Everyone is operating under incomplete information conditions; if your informations is slightly less incomplete, you can turn that into an advantage.
This is a fun book, an easy read and definitely worth reading if you want to know more about the financial industry. You'll learn a bunch and not even realize it.
One final note- I was staggered by the change in scale in a decade and a half- in 1992 Soros broke the pound sterling by going in with $10B (others followed). He couldn't buy more when he tried (tragically, he only made $1B in that deal). Just before the mortgage crisis, Michael Lewis details an investor dropping $25B against CDOs and the market not flinching. I understand that currency speculation and aggregated mortgages are not identical, but the spike in scale is shocking to me.
Owen Gardner Finnegan
August 5, 2021
The global financial markets remind me a lot of the human body, and the intricate physiological systems contained within it. Various different control points serve to maintain some level of consistency in trends within equity/bond/derivative markets, as well as within the body. This means that one can (in theory) use first principles (combined with contextual information) to identify arbitrage opportunities, in the same way one could "logic out" how the body might respond to blood loss.
The sort of mental process involved in this is exemplified by hedge funds, filled with traders and managers who constantly seeking out alpha via asymmetrical bets, off which they can profit. The dynamics of block trading were particularly fascinating to me, because in theory, it sounds like a neat and tidy system. But of course, it is not without its problems, as seen with the behaviour of some rather shady brokers.
Each big hedge fund manager Mallaby profiles is painted in vivid colour, from Soro’s view that one has to play the psychological angle with investments, to Paul Tudor Jones’ “ride the wave” philosophy. I also really liked the analysis of how Soros famously broke the Bank of England, it’s all from first principles, like much of the book, which makes it very easy to follow.
The book moves on chronologically from Soros and the other big currency traders of the 90s, reaching the rise of the quants. I couldn’t help but marvel at the sort of lateral thinking that these players were deploying, as exemplified by the mechanics of Brown and Mercer’s French translation programme. However, the strategy of chasing ghosts in the machine did play a role in the quant crisis of 2007, with random market anomalies being picked up, and triggering large price movements.
Ultimately, the question this book seeks to answer is, “are hedge funds good for the world?” Mallaby asserts that they are, pointing to the limited jeopardy that their implosions pose to global markets, and the fact they shift risk away from the big banks which are "big enough to fail." I suspect this is a bit of an optimistic view of the situation, given hedge funds still do wield such incredible power over financial markets, which is somewhat unchecked.
The sort of mental process involved in this is exemplified by hedge funds, filled with traders and managers who constantly seeking out alpha via asymmetrical bets, off which they can profit. The dynamics of block trading were particularly fascinating to me, because in theory, it sounds like a neat and tidy system. But of course, it is not without its problems, as seen with the behaviour of some rather shady brokers.
Each big hedge fund manager Mallaby profiles is painted in vivid colour, from Soro’s view that one has to play the psychological angle with investments, to Paul Tudor Jones’ “ride the wave” philosophy. I also really liked the analysis of how Soros famously broke the Bank of England, it’s all from first principles, like much of the book, which makes it very easy to follow.
The book moves on chronologically from Soros and the other big currency traders of the 90s, reaching the rise of the quants. I couldn’t help but marvel at the sort of lateral thinking that these players were deploying, as exemplified by the mechanics of Brown and Mercer’s French translation programme. However, the strategy of chasing ghosts in the machine did play a role in the quant crisis of 2007, with random market anomalies being picked up, and triggering large price movements.
Ultimately, the question this book seeks to answer is, “are hedge funds good for the world?” Mallaby asserts that they are, pointing to the limited jeopardy that their implosions pose to global markets, and the fact they shift risk away from the big banks which are "big enough to fail." I suspect this is a bit of an optimistic view of the situation, given hedge funds still do wield such incredible power over financial markets, which is somewhat unchecked.
October 31, 2011
Fantastic, highly recommended. Basically three books in one: history of major economic/financial events over the last fifty years, an analysis of hedge funds and the financial economics, and the motivation for a policy recommendation.
Mallaby has lots of nuance, appreciates the pro and con of every argument, but basically the main arguments of his book are: (1) hedge funds can get above market returns by exploiting information or anomalies that others do not; (2) in the process they improve the allocation of capital and, on balance, stabilize markets by, for example, minimizing bubbles by selling short; and (3) when they fail, hedge funds rarely pose a systemic risk to the economy or financial system, when they go bust it is generally another hedge fund that rushes in to take them over (see points 1 and 2 above).
Mallaby manages to convey all of this in a suspenseful page turner that uses well chosen anecdotes and stories to keep you engaged from beginning to end.
Mallaby has lots of nuance, appreciates the pro and con of every argument, but basically the main arguments of his book are: (1) hedge funds can get above market returns by exploiting information or anomalies that others do not; (2) in the process they improve the allocation of capital and, on balance, stabilize markets by, for example, minimizing bubbles by selling short; and (3) when they fail, hedge funds rarely pose a systemic risk to the economy or financial system, when they go bust it is generally another hedge fund that rushes in to take them over (see points 1 and 2 above).
Mallaby manages to convey all of this in a suspenseful page turner that uses well chosen anecdotes and stories to keep you engaged from beginning to end.
July 14, 2011
The book is a first-rate piece of non-fiction. Mallaby scans the history hedge funds over the past 60 or so years, with most chapters focusing in on an economic event and particular fund manager or hedge fund responding to such. (One minor quibble is Mallaby never quite says why A.W. Jones gets credit for developing the first hedge fund over, say, Benjamin Graham or John Maynard Keynes.)
Along the way you learn quite a bit, also, about the financial scene going on at the time; from the commodities boom of the 70's, to currency pegs in the 90's, to today's sub-prime meltdown/aftermath and points in-between. And, for good measure, the Efficient Market Hypothesis (and its proponents) come in for some well-deserved criticism.
In the end, you will marvel at what these men and their funds can accomplish (and he does touch, near the end, briefly on Survivorship Bias inherent in such a book).
Mallaby clearly admires many of the hedge fund managers covered, and concludes with a compelling reason why hedge funds are needed and necessary. Further he pushes back at some of the criticism aimed their way while allowing they are far from being faultless. In advocating hedge funds, I wish Mallaby would have tackled whether, say, investment banks could learn from them. For one thing, investment banks used to be partnerships (not publicly traded), could they go back to (via regulation even) such a structure? The capital structure is touched on, but more as it relates to an advantage for hedge funds rather then advocating investment banks reverting back.
If you enjoy the financial markets, I suspect you will greatly enjoy this book.
Along the way you learn quite a bit, also, about the financial scene going on at the time; from the commodities boom of the 70's, to currency pegs in the 90's, to today's sub-prime meltdown/aftermath and points in-between. And, for good measure, the Efficient Market Hypothesis (and its proponents) come in for some well-deserved criticism.
In the end, you will marvel at what these men and their funds can accomplish (and he does touch, near the end, briefly on Survivorship Bias inherent in such a book).
Mallaby clearly admires many of the hedge fund managers covered, and concludes with a compelling reason why hedge funds are needed and necessary. Further he pushes back at some of the criticism aimed their way while allowing they are far from being faultless. In advocating hedge funds, I wish Mallaby would have tackled whether, say, investment banks could learn from them. For one thing, investment banks used to be partnerships (not publicly traded), could they go back to (via regulation even) such a structure? The capital structure is touched on, but more as it relates to an advantage for hedge funds rather then advocating investment banks reverting back.
If you enjoy the financial markets, I suspect you will greatly enjoy this book.
January 11, 2011
More entertaining than a history of hedge funds has any right to be. The book is chockfull of colorful anecdotes, and clearly demonstrates that some hedge fund titans are genuinely interesting people. Still, interesting though they may be, they also mostly come off as bunch of macho, immature, materialistic jerks, and Mallaby sometimes seems just a bit too awed by their money-making prowess, which strikes me as a rather sad commentary on him (and them).
I think that the more interesting aspects of this book trace the way that the growth of hedge funds has affected modern finance and political economy. Here, Mallaby is much shrewder, and he also advances a provocative thesis--despite all of the opprobrium they attract, hedge funds are fundamentally productive contributors to our economy in ways that, say, the big investment banks and rating agencies are not. I'm not sure I agree with him or the conclusions he draws, but they're worth grappling with.
I think that the more interesting aspects of this book trace the way that the growth of hedge funds has affected modern finance and political economy. Here, Mallaby is much shrewder, and he also advances a provocative thesis--despite all of the opprobrium they attract, hedge funds are fundamentally productive contributors to our economy in ways that, say, the big investment banks and rating agencies are not. I'm not sure I agree with him or the conclusions he draws, but they're worth grappling with.
June 17, 2023
"More Money Than God: Hedge Funds and the Making of a New Elite" is an enthralling and insightful exploration of the rise and influence of hedge funds in the financial world. The author delves into the history of hedge funds, tracing their evolution from their humble beginnings to becoming the powerhouse of modern finance. With a combination of meticulous research and engaging storytelling, the book offers a deep understanding of the strategies, personalities, and impact of these investment vehicles. It provides a balanced view, highlighting the successes and failures of hedge fund managers while examining their controversial role in shaping markets and economies. For anyone interested in finance, investment, or the inner workings of the elite financial world, this book is a captivating and informative read.
December 9, 2014
The book is a good history lesson on hedge funds. The author has done thorough research and the book is a good read for anyone who wants to get a glimpse of the functioning of Wall Street. The language is easy and it has been written like a story. However, the author has a fixed agenda starting from the first page, and rationally and irrationally tries to prove his point that hedge funds are a better alternative to big(too big to fail) banks. This bias starts irritating at some point and it becomes hard to follow the author, because the author has given ridiculous logic to prove his point.
Nevertheless, it is still a good read. One can just skip the pages where author is trying to justify his point.
Nevertheless, it is still a good read. One can just skip the pages where author is trying to justify his point.
June 5, 2014
Its insane when Hedge funds can lose hundreds of million dollars per hour in some cases and still come out on the right side of the trade.
It does try really hard to show the Hedge funds in a good light (providing liquidity, making prices more efficient etc.), But it is really hard to fathom the cases of Soros and Druckenmiller when they willfully killed the Sterling and then the Thai Baht.
Loved reading the book, these guys (hedge fund managers) are hyper alpha males, and willing to go all out to get a single penny. Nicely written. I have new found respect for Druckenmiller after this. Soros, a bit less - he is a philanthropist with an agenda.
It does try really hard to show the Hedge funds in a good light (providing liquidity, making prices more efficient etc.), But it is really hard to fathom the cases of Soros and Druckenmiller when they willfully killed the Sterling and then the Thai Baht.
Loved reading the book, these guys (hedge fund managers) are hyper alpha males, and willing to go all out to get a single penny. Nicely written. I have new found respect for Druckenmiller after this. Soros, a bit less - he is a philanthropist with an agenda.
December 27, 2015
A history lesson on the origins of hedge funds, back when hedging was still a pre-requisite for the moniker, to George Soro's giant $10 B pound short, to the implosion of the Long Term Capital Management quants, to the misunderstood role of hedge funds during the financial crisis in 2008. The author argues that hedge funds as they are present a less systemic risk than the large public bank institutions in place where moral hazard runs rampant. Not recommended for a general audience but a worthwhile read for finance geeks
February 17, 2016
This is a wonderful book. It is well-researched such that, regardless of your initial biases toward the financial services industry, you can accept Mallaby's perspectives as legitimate.
He concludes by arguing that hedge funds are safer for the country than large banks. He also argues that, despite popular belief, hedge funds are democratic by managing money for many non-profit and educational investors.
He concludes by arguing that hedge funds are safer for the country than large banks. He also argues that, despite popular belief, hedge funds are democratic by managing money for many non-profit and educational investors.
December 21, 2017
If you aspire to get a job in this industry, this is perfect for you.
Also got to know about some geniuses.
Crisis of Citadel and Quantum's bet on GBT are the best parts
Also got to know about some geniuses.
Crisis of Citadel and Quantum's bet on GBT are the best parts
March 18, 2019
One of the best books I have read about the financial markets. Tells you a detailed and interesting history of the hedge funds along with the Titans of the Industry.
#Worth the Time and Money !
#Worth the Time and Money !
December 25, 2019
Must read for practitioners of investing.
June 11, 2020
I picked up this book, expecting it to be an interesting, easy-to-read nuts and bolts of Wall Street money making machines (like Flash Boys). The book is certainly interesting, though the author makes it hard to read with a massive amount of notes at the back of the book. The problem is that these notes are actually really interesting on their own rights (quotes from Buffet, Druckenmiller, Long Term Capital Management's founder, etc.) so the fact that I spent an inordinate amount of time just flipping between the pages to read these notes is the sole reason why this book does not make 5-star in my list.
Content-wise, the book is a true page-turner. The author walked us through a series of events, from Alfred Jones coming up with shorting to hedge investment to DruckenMiller and Soros's singlehandedly upending the British's monetary policy to the rise of algorithmic multi-strategy hedge fund shops. You do have to have some basic understanding of modern financial and banking system to make sense of the techniques different hedge funds was engaged on (short-selling, option pricing, credit default swap, efficient market theory, etc.) but it was quite interesting to see what I took for granted in Financial Theory class (those footnotes about efficient market theory comes to mind) held the basis of people making consistent 2 figures ROI.
Nowadays, the public conversation around hedge funds usually center around them being greedy, money sucking machines or them not having any alphas beyond market consensus. Mallaby's book, with the wisdom of hindsight, serve as a staunch defense against those attacks, arguing that comparing to other financiers in the field (investment banks, mutual funds, etc.), hedge funds are way better positioned -- in terms of size, incentive, and their readiness to innovate, to generate profits and avoid destabilizing the economy at the scale of AIG or Lehnman Brothers. This much I agree with the author. To the extent that Mallaby's was arguing that the British government transferring 1 billion dollar to Soros's bank account was not necessarily bad or that "The chief policy prescription suggested by the history of the [hedge fund] industry can be boiled down to two words: Don't regulate", I leave other readers to reach their own conclusion.
Content-wise, the book is a true page-turner. The author walked us through a series of events, from Alfred Jones coming up with shorting to hedge investment to DruckenMiller and Soros's singlehandedly upending the British's monetary policy to the rise of algorithmic multi-strategy hedge fund shops. You do have to have some basic understanding of modern financial and banking system to make sense of the techniques different hedge funds was engaged on (short-selling, option pricing, credit default swap, efficient market theory, etc.) but it was quite interesting to see what I took for granted in Financial Theory class (those footnotes about efficient market theory comes to mind) held the basis of people making consistent 2 figures ROI.
Nowadays, the public conversation around hedge funds usually center around them being greedy, money sucking machines or them not having any alphas beyond market consensus. Mallaby's book, with the wisdom of hindsight, serve as a staunch defense against those attacks, arguing that comparing to other financiers in the field (investment banks, mutual funds, etc.), hedge funds are way better positioned -- in terms of size, incentive, and their readiness to innovate, to generate profits and avoid destabilizing the economy at the scale of AIG or Lehnman Brothers. This much I agree with the author. To the extent that Mallaby's was arguing that the British government transferring 1 billion dollar to Soros's bank account was not necessarily bad or that "The chief policy prescription suggested by the history of the [hedge fund] industry can be boiled down to two words: Don't regulate", I leave other readers to reach their own conclusion.
May 29, 2022
One of the best books I've read of late! The book is a highly nuanced (and academic) take on the history of the American hedgefund industry - from the time A.W Jones set up the first 'hedged fund' in 1949 to the Financial Crisis of '08. Nearly 30-40% of the book is a deep-dive into the pioneering stories of the Big Three - Soros, Robertson, and Steinhardt - through the 70s to the early 2000s.
Written in a crisp narrative style, I liked that the book explained the detailed economics behind the industry-defining global trades taken by the Big Three - along with arguments (for and against) the morality of such economy-shattering trade executions. The author also writes about the rise of quant-trading with examples of Commodities Corporation, RenTech, and others.
Highlighting the several flaws with traditional, centralised finance; the book ends with the Financial Crisis and its aftermath - here, making several key academic distinctions between the nature of (and relationship between) bulge-bracket banks and hedgefunds.
A 5/5 finance read!
Written in a crisp narrative style, I liked that the book explained the detailed economics behind the industry-defining global trades taken by the Big Three - along with arguments (for and against) the morality of such economy-shattering trade executions. The author also writes about the rise of quant-trading with examples of Commodities Corporation, RenTech, and others.
Highlighting the several flaws with traditional, centralised finance; the book ends with the Financial Crisis and its aftermath - here, making several key academic distinctions between the nature of (and relationship between) bulge-bracket banks and hedgefunds.
A 5/5 finance read!
July 1, 2020
This is an authoritative history of hedge funds, starting from AW Jones' first hedge fund in the late 1940s, up until the late 2000s and the global financial crisis. It covers all the usual suspects including Jones, Steinhart, Soros, Julian Robertson, Jim Simons, Paul Tudor Jones, Ken Griffin, etc and provides a glimpse into how they started and evolved, and in some cases disappeared into oblivion.
For market enthusiasts, this is like a history crash course, which covers the most important characters and events, but does not delve into the details beyond a point. Like most history pieces, this is tinted with some degree of bias too, where the author transparently comes out in support of hedge funds and their market role.
My only minor grouse with this book is that it does not cover the last decade. I wish the author had come out with an updated version.
For market enthusiasts, this is like a history crash course, which covers the most important characters and events, but does not delve into the details beyond a point. Like most history pieces, this is tinted with some degree of bias too, where the author transparently comes out in support of hedge funds and their market role.
My only minor grouse with this book is that it does not cover the last decade. I wish the author had come out with an updated version.
December 10, 2021
What a fantastic read on the history of hedge funds! Great exposition on its humble beginnings, the major people behind it and divisive force it has become today in modern finance. Mallaby is a great storyteller and it was impossible to put it down.
What stood out for me is the amount of research that went into this book. The details were borne out of hundreds of hours of interviews with people it would ordinarily be hard to find oneself in the same room with. Not to mention the painstaking analysis that went behind reconstructing the same event from the memory of different people, who remember things differently with different motivations. In the acknowledgements, it was written that Mallaby asked one of his analysts for a comparison with the Italian bond index. However in 1994, such an index did not exist, so the analyst created one on his own. It is little details like this that make the picture more complete and less prone to biases.
My favourite quip of the book comes towards the fag end of it, when Paul Tudor Jones was stuck with his Kazakstan bonds in the financial crisis of 2008. In an interview with the author he mentions,
It's not the price free fall that fucks you, its the liquidity. Always.
What stood out for me is the amount of research that went into this book. The details were borne out of hundreds of hours of interviews with people it would ordinarily be hard to find oneself in the same room with. Not to mention the painstaking analysis that went behind reconstructing the same event from the memory of different people, who remember things differently with different motivations. In the acknowledgements, it was written that Mallaby asked one of his analysts for a comparison with the Italian bond index. However in 1994, such an index did not exist, so the analyst created one on his own. It is little details like this that make the picture more complete and less prone to biases.
My favourite quip of the book comes towards the fag end of it, when Paul Tudor Jones was stuck with his Kazakstan bonds in the financial crisis of 2008. In an interview with the author he mentions,
For a trader like Paul Jones, the worst thing was that he was trapped in these positions. When he speculated in futures, he always knew he could turn on a dime; indeed, he never created a position without put- ting in a “stop” that would take him out if he began to suffer losses. But the emerging-market loans were utterly illiquid: After Lehman declared bankruptcy, nobody wanted to hold any loans at any price, so there was no way to get rid of them. “I realized that our emerging-market trading book was going to get absolutely hammered and there was nothing I could do about it. . . . That was the worst moment of my whole life,” Jones said later. In his anguish and his helplessness, he thought back to what he had read about the only disaster that approached this one in scale. “I used to always think, ‘Holy cow, how’d these guys in 1929 lose it all? How could anybody be so boneheaded? You’d have to be a complete moron!’ And then that day, I thought, ‘Oh my God. I see how these guys in ’29 got hurt now. They were not just sitting there long the market. They had things that they couldn’t get out of.”
It's not the price free fall that fucks you, its the liquidity. Always.
February 12, 2022
The term "hedge fund" evokes a strong reaction from most, whether you consider them the Masters of the Universe (a lá Bonfire of the Vanities) or the worst Symptoms of a greedy financial system. Whatever side you fall on, this book gives a great account of the history of the most fascinating financial firms. I'm not sure how to value Mallaby's reasoning that hedge funds (mostly) require no regulation, and it is definitely not one of the strong take-aways of this book. Instead it is a nice intro to the landscape and context that these firms operate in.
May 16, 2020
This is one of the best Financial books that I've ever read. The author shares the whole history about hedge funds: how they start, how they build their industry, and so on.
The book also describes the many ways hedge funds make money such as, by trading against central banks that aren't in the market of profits, by taking another side when big institutions need liquidity, by sensing all kinds of asymmetric opportunities.
Read this book if you would like to know more about these amazing players and how they beat the market decade after decade.
The book also describes the many ways hedge funds make money such as, by trading against central banks that aren't in the market of profits, by taking another side when big institutions need liquidity, by sensing all kinds of asymmetric opportunities.
Read this book if you would like to know more about these amazing players and how they beat the market decade after decade.
June 28, 2020
This was nothing short of a thorough history lesson on the who's who of hedge funds with gripping narratives on all major financial events that transpired over the last 60 years. It really goes into detail into the crests and troughs in the money, bond and stock markets and beautifully weaves in the role hedge funds played in each scenario. throughout the book Sebastian Mallaby takes a very pro(ish)- neutral stance on hedge funds and their role in shaping macro economics. At a tactical event level he swings both ways - from being critical of hedge funds to being reverent of them. He points fingers at character flaws including meddling in the currency market, irresponsible leveraging (to none's surprise) unproven risk models and momentum riding. But sure enough he balances these out well as brewing over all the positives that they bring to the table making a strong case for keeping the industry unregulated. Ken Griffin would like that!
I was surprised by the amount of sheer research that went into this book. From accurately stating fact and market stats to describing late night boardroom dramas, this was narration at it's very best. Events, triggers, outcomes and everything in between moved at a blitzkrieg pace. Don't be surprised if you have to read a couple of pages twice over to really grasp the technicals within.
One aspect that didn't bode well with me was how Sebastian draws a very clean line between fundamentals based value vs technical investing. There is almost certainly a lot of grey area in between as with the cast of LTCM and Quantum. Though every chapter there were moment that makes readers drool over all the money that was being made, at the same time feeling gutted by all the leverage and losses that had to be digested.
A Wonderful book for a primer into hedge funds! It's all fact, but feels like fiction.
I was surprised by the amount of sheer research that went into this book. From accurately stating fact and market stats to describing late night boardroom dramas, this was narration at it's very best. Events, triggers, outcomes and everything in between moved at a blitzkrieg pace. Don't be surprised if you have to read a couple of pages twice over to really grasp the technicals within.
One aspect that didn't bode well with me was how Sebastian draws a very clean line between fundamentals based value vs technical investing. There is almost certainly a lot of grey area in between as with the cast of LTCM and Quantum. Though every chapter there were moment that makes readers drool over all the money that was being made, at the same time feeling gutted by all the leverage and losses that had to be digested.
A Wonderful book for a primer into hedge funds! It's all fact, but feels like fiction.
February 14, 2016
Other than the title may suggest, More Money Than God is, in essence, a plea against hedge fund regulation. Mallaby describes various hedge funds and their effect on markets, often explaining how these hedge funds defied the ‘laws’ of finance. Indeed, it is illustrated how hedge funds managers were able to generate above-market returns by finding statistical anomalies, patterns, asymmetrical bets, and sometimes by ‘simply’ picking the right stocks to invest in.
More Money Than God combines fine research with a pleasurable writing style, and Mallaby does not eschew from giving his opinion on the subject matter. I did not always agree with his opinion, but he clearly expresses how he arrived at his conclusions. This makes for a pleasurable read, as it forces the reader to think critically about what the author is stating. I personally felt triggered to engage actively with this book, ferociously skimming to the notes to see where Mallaby got his information from.
The book contains informations on famous hedge funds like Long-Term Capital Management, and legendary personalities such as Jim Chanos and George Soros, but also lesser known hedge funds such as Commodities Corporation. Mallaby does not abstain from being snarky, both against hedge funds ...
... and against regulators
In its conclusion, Mallaby explains how he deems, generally speaking, hedge fund regulation unnecessary. Not the too small to fail hedge funds, but too large to fail financial institutions pose risk to the financial system. To some extent I do agree, but Mallaby neglects to mention that there were some near-misses with imploding hedge funds. The 1998 bust of Long-Term Capital Management came very close to needing public bailout money, it was only by an ad-hoc, Fed-brokered intervention that banks decided to support the failing hedge fund. I do agree with the view of the author that stringent regulation is counterproductive, but forcing more transparency about, for instance, leverage ratios and sector exposures, would give regulators better tools to oversee the industry, without being notoriously burdensome for the hedge funds involved.
All in all, a great account of hedge funds. Even if one has a diametrically opposed view towards hedge funds, one can still appreciate the thorough research and fine writing style. It is one of the rare occasions where a book truly deserves five stars.
More Money Than God combines fine research with a pleasurable writing style, and Mallaby does not eschew from giving his opinion on the subject matter. I did not always agree with his opinion, but he clearly expresses how he arrived at his conclusions. This makes for a pleasurable read, as it forces the reader to think critically about what the author is stating. I personally felt triggered to engage actively with this book, ferociously skimming to the notes to see where Mallaby got his information from.
The book contains informations on famous hedge funds like Long-Term Capital Management, and legendary personalities such as Jim Chanos and George Soros, but also lesser known hedge funds such as Commodities Corporation. Mallaby does not abstain from being snarky, both against hedge funds ...
“The visitors reveled in the Arctic wilderness, pitting their wits against powerful salmon; and with the instinct that wealthy people sometimes develop, they resolved that sine they liked the camp so much the right thing was to buy it.” (p. 189)
... and against regulators
“It soon became clear that the regulators had no concrete ideas on how to stop imploding hedge funds from damaging their creditors; and in the absence of an action plan, they resorted to plan B - assert that no action is needed” (p. 193).
In its conclusion, Mallaby explains how he deems, generally speaking, hedge fund regulation unnecessary. Not the too small to fail hedge funds, but too large to fail financial institutions pose risk to the financial system. To some extent I do agree, but Mallaby neglects to mention that there were some near-misses with imploding hedge funds. The 1998 bust of Long-Term Capital Management came very close to needing public bailout money, it was only by an ad-hoc, Fed-brokered intervention that banks decided to support the failing hedge fund. I do agree with the view of the author that stringent regulation is counterproductive, but forcing more transparency about, for instance, leverage ratios and sector exposures, would give regulators better tools to oversee the industry, without being notoriously burdensome for the hedge funds involved.
All in all, a great account of hedge funds. Even if one has a diametrically opposed view towards hedge funds, one can still appreciate the thorough research and fine writing style. It is one of the rare occasions where a book truly deserves five stars.
January 12, 2011
Sebastian Mallaby makes a fairly convincing argument in favor of hedge funds here, and it’s hard to dismiss the romance of idiosyncratic loners going off and starting their own companies that beat out Goldman Sachs. The book follows the history of hedge funds, from their beginnings with a quasi-socialist Hemingway pal to their contemporary status as the plunderers of Wall Street, and certainly a good case is made that the biggest problems with Wall Street come from the plodding, public investment banks, not the nimble, privately-owned funds that bring in outrageous sums of money, and still manage to cost taxpayers nothing when they fail.
However, saying that something is not as bad as another thing is not necessarily saying that it’s good. While hedge funds can, as Mallaby shows, serve a helpful role in calming and growing markets, they often don’t, and a part of Mallaby’s argument is belied slightly by the structure of his book – the timeline he traces uses the various (and often famous) disasters in the hedge fund world as signposts. Mallaby also ignores the fact that, while hedge funds may not be inherently evil, and may not cause the kind of damage that investment bankers (their primary, envious competitors) claim, they’re also strictly for investors who are already outrageously rich. Investment minimums and the clientele that hedge funds serve (with the exception of university endowments) are not discussed, and it’s hard to say that making wealthy people even wealthier is really doing all that much good for anybody.
Still, while I don’t entirely jive with the thesis, this is an excellent history of hedge funds, and a slightly overambitious defense of them (maybe he’s trying to get a job at Citadel), and certainly worth reading (if you’re into that sort of thing).
However, saying that something is not as bad as another thing is not necessarily saying that it’s good. While hedge funds can, as Mallaby shows, serve a helpful role in calming and growing markets, they often don’t, and a part of Mallaby’s argument is belied slightly by the structure of his book – the timeline he traces uses the various (and often famous) disasters in the hedge fund world as signposts. Mallaby also ignores the fact that, while hedge funds may not be inherently evil, and may not cause the kind of damage that investment bankers (their primary, envious competitors) claim, they’re also strictly for investors who are already outrageously rich. Investment minimums and the clientele that hedge funds serve (with the exception of university endowments) are not discussed, and it’s hard to say that making wealthy people even wealthier is really doing all that much good for anybody.
Still, while I don’t entirely jive with the thesis, this is an excellent history of hedge funds, and a slightly overambitious defense of them (maybe he’s trying to get a job at Citadel), and certainly worth reading (if you’re into that sort of thing).
January 2, 2018
I always thought of hedge funds as the private playground of multimillionaires, which help the wealthy to become even more wealthier. It turns out my belief was not completely unfounded. Nevertheless, Mallaby proves that there is much more to the overall story of hedge funds. He does a great job by walking his reader through the history, development, types, boom and bust cycles of hedge funds, also explaining their role and impact to the health of the global financial system.
Clearly, hedge funds may come in a great variety. Just as one can admire astonishingly different animals in a zoo, like a gecko or an elephant, visiting an imaginary zoo of hedge funds would leave the visitor with similarly mixed impressions. Mallaby's tales about the most prominent hedge fund superstars, their biggest killings and steepest falls constitute an amusing story. More importantly though, Mallaby, by looking at the broader picture, puts forward compelling arguments about why hedge funds, contrary to the general public opinion and political sentiment, tend to represent lower risks for the globalized financial system than, for instance, banks. Despite the huge disparity in the level of regulatory controls over hedge funds and banks, the combination of incentives, pressures and dynamics faced by hedge fund managers serves to ensure that hedge funds can overall better manage risks than complacent, badly incentivized and ineffectively regulated bankers. After finishing this book, I cannot help but wonder to what extent the ever-increasing pace of development in computer sciences and AI will influence and refine investment strategies - in essence, speculation - followed by hedge funds.
Clearly, hedge funds may come in a great variety. Just as one can admire astonishingly different animals in a zoo, like a gecko or an elephant, visiting an imaginary zoo of hedge funds would leave the visitor with similarly mixed impressions. Mallaby's tales about the most prominent hedge fund superstars, their biggest killings and steepest falls constitute an amusing story. More importantly though, Mallaby, by looking at the broader picture, puts forward compelling arguments about why hedge funds, contrary to the general public opinion and political sentiment, tend to represent lower risks for the globalized financial system than, for instance, banks. Despite the huge disparity in the level of regulatory controls over hedge funds and banks, the combination of incentives, pressures and dynamics faced by hedge fund managers serves to ensure that hedge funds can overall better manage risks than complacent, badly incentivized and ineffectively regulated bankers. After finishing this book, I cannot help but wonder to what extent the ever-increasing pace of development in computer sciences and AI will influence and refine investment strategies - in essence, speculation - followed by hedge funds.
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