We See Opportunities Where Others Don't

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Posted By: Bob C.

If one wants a sage thought provoking read about opportunistic risk taking, one can get the book. I don't see the correlation to our hobby Bruce. Are you saying we should approach the hobby/industry/whatever in this same fashion? A large casino table? To quote: "You've got a better chance surviving as a crack dealer in Chicago than lasting four years in the hedge fund business."
Sorry, I don't view collecting that way. If I want to gamble I will hop on a plane to Vegas. Or call my broker. Not accumulate high grade pre war baseball cards then giddily broadcast pecuniary wizardry to the world. My two cents.

REPORT
"Hedge Hunters," by Katherine Burton
Reviewed by Chris Nicholson Published: December 21, 2007

"Hedge Fund Masters on the Rewards, the Risk, and the Reckoning By Katherine Burton 206 pages. Bloomberg Press.

Maybe God doesn't play dice with the universe, but hedge fund managers do. They view the world as a casino table: a place of shifting probability and potential wins.

Now, as financial markets tremble and groan under the strains of subprime debt, as all eyes turn toward the complex wagers that led up to this moment, it is time to look at who has made it in hedge funds, what path they took, and how they are weathering this storm.

Eighteen of the secretive industry's top performers, incisively profiled over as many chapters, fill this topical, instructive book by Katherine Burton, a reporter at Bloomberg News since 1993. Instructive, because it offers insight into how the managers invest, as well as a look at the human soul. For money is an amplifier: If you have ideas, principles or taste, money writes it large; the same thing goes if you don't.

Take Craig Effron, hedge guru in blue jeans. In the early 1990s, he was one of the people who figured out that Russians, recently issued 10,000-ruble vouchers for stock in state-owned companies, wouldn't want to wait to cash them in or didn't understand the notion of holding shares. So he sent someone to buy the paper at less than a third its face value, and made a killing. "That was a good gig," Burton quotes him as saying.

Some of these men (and yes, they are all men) earned their money in quite respectable ways; others in more doubtful ones. But if Burton draws a line between the two, it is blurred by her forgiving regard for the profession as a whole. To write a book like this, one must have a certain admiration for money, regardless of its origins; to be included in such a book, one must have an overwhelming desire to make it, to the exclusion of other ambitions.

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Listen to Julian Robertson, founder of Tiger Management and mentor to a generation of now-middle-aged managers known as the Tiger Cubs: "When you manage money, it takes over your whole life. It's a 24-hour-a-day thing." Only later does philanthropy kick in, like a cleanup crew after a parade.

Perhaps Burton's gray zone is wide because in circles where getting rich is the chief aim of a life, one's capacity to risk money, as hedge fund managers do, is known as courage. But this slinging about of fine qualities makes the greatest gamblers look like the greatest men, and makes their behavior, driven by an adventuresome avarice, seem worthy of imitation. Nothing against making money, but to ennoble it as Burton does is to lend money the last thing it lacks.

Still, the hedge fund managers she writes about are rich, powerful, the Gatsbys of our age - and for those reasons if no others, they deserve study.

Can Burton help us in that? Yes. Her lengthy interviews with these managers are a window onto how wealth operates. They convey the variety of characters that succeed in hedge funds, and the conversations recorded in this book are strewn with gems.

Burton's book surprises with its comedy and color. "We believe the efficient market hypothesis is a bunch of crap," says Bernay Box, who founded and runs Bonanza Capital, which invests in small-capitalization companies. Michael Steinhardt, a trailblazer in hedge funds, admits that he prematurely exited most of the winning bets he ever made - not for fear of losing but because they no longer posed an intellectual challenge.

There is even mentorship here, as Burton asks her hedge hunters what it takes to get into the business. The criteria are many, and they depend on whom you ask: confidence and humility, analysis and intuition, conviction and openness to persuasion. Only three traits win universal agreement - hard work, a keen mind and consistent profit - but if you don't have the profit, the other two don't matter.

Aspiring hedge fund managers will experience, in studying these interviews, moments of epiphany. One will be about how fleeting a fund is. Some of the industry's biggest names - Robertson, for example, or T. Boone Pickens, who now heads BP Capital - ran into trouble and had to shut down or regroup. To quote Roberto Mignone, head of Bridger Management: "You've got a better chance surviving as a crack dealer in Chicago than lasting four years in the hedge fund business."

In other words, an exciting game, but an easy one to lose."
Chris Nicholson is an editor at the International Herald Tribune.