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Money Mavericks: Confessions of a Hedge Fund Manager / Edition 1
     

Money Mavericks: Confessions of a Hedge Fund Manager / Edition 1

by Lars Kroijer
 

ISBN-10: 027373198X

ISBN-13: 9780273731986

Pub. Date: 09/28/2010

Publisher: Pearson Education

"I read this book cover to cover, and enjoyed every bit of it. The hedge fund industry is not known for its modesty, yet this book is not only full of fascinating information but is refreshing in this respect as well."

Andrei Shleifer, Professor of Economics, Harvard University

"Without sensationalising, Lars tells it like it is – a no-holds-barred,

Overview

"I read this book cover to cover, and enjoyed every bit of it. The hedge fund industry is not known for its modesty, yet this book is not only full of fascinating information but is refreshing in this respect as well."

Andrei Shleifer, Professor of Economics, Harvard University

"Without sensationalising, Lars tells it like it is – a no-holds-barred, warts-and-all account of what it's like to try and set and run a hedge fund."

Neil Wilson, editor, Eurohedge

"A compelling and demystifying chronicle of hedge funds, and of hedge fund managers. Lars' experience is by no means novel in the industry, but his perspective most certainly is."

Drew Dickson, Managing Partner, Dickson Capital Management

"In a world where few understand their complexities, Money Mavericks provides a compelling and accurate insight into the secretive workings of a hedge fund."

Tets Ishikawa, author of "How I Caused the Credit Crunch

Some call them 'grotesque', others as 'absolutely crazy bodies', and still more refer to them as 'hellish': hedge fund managers are stealthy, wealthy and tend to avoid the spotlight. But is this fair?

Read on to find out.

Money Mavericks: Confessions of a Hedge Fund Manager charts the founding, seemingly interminable rise and eventual closure of a fund which operated in London during the febrile years of 2002 to 2008. Shedding light on the incredible inside workings of hedge funds, it's a tale of a bubble industry in a bubble town during the bubble years. It tells the story of some very smart people who were trying to do something that was incredibly hard: beat the market. If they failed, the repercussions would be swift and severe. If they succeeded, the rewards would be massive.

Product Details

ISBN-13:
9780273731986
Publisher:
Pearson Education
Publication date:
09/28/2010
Series:
Financial Times Series
Edition description:
Older Edition
Pages:
224
Product dimensions:
6.00(w) x 9.10(h) x 0.70(d)

Table of Contents

Preface: The life of a Hedge Fund

[Not written yet]

· The book starts with tumultuous episode that captures the essence of hedge funds and the story of Holte Capital.

· Preface will frame the book and explain who it is written for.

· Will explain who Lars is, why he wants to tell the story, and why he is the right person to tell it.

Introduction: Good luck Lawrence

· Describes The author' first interview with industry titan Richard Perry.

· The author' incredible arrogance irritated Perry enough that he returned The author' resume saying "Good luck Lawrence".

· Interview sparks The author' interest and gets him started learning more about hedge fund industry.

Part I: Getting Ready for Holte Capital

Chapter 1: Becoming a Hedgie

· Chapter outlines the road to taking a job at a New York hedge fund in the context of an internet crazed Harvard Business School.

· The author moves from NY to London fund despite bursting his eardrum with a pen before getting on the flight for the final interview.

· Chapter briefly describes the work of a junior person at a hedge fund and the job searching process.

Chapter 2: Taking the Jump

· The thoughts that went into the decision to quit high paying job to become a hedge fund entrepreneur.

· Chapter goes through the costs and process of setting up a fund as The author discovers how expensive and draining it will be.

· Chapter introduces Brian, The author' long time friend and business partner.

Chapter 3: Starting a Hedge Fund

· Early days. Chapter takes reader to important prime brokerage meeting with Morgan Stanley where bank shows real willingness to put efforts behind Holte.

· The author is invited to fund raising conference at Versailles which he attends as a slightly lost nobody. Chapter 4: On the Road

· Morgan arranges a road trip befitting a boy band. Chapter takes reader along on trips to Paris, Geneva, Zurich, and through the US.

· Anecdotes from funny and failed meetings on the road as The author starts to realize that raising money will be much harder than originally thought.

Chapter 5: Limping to Launch

· Back in the office this chapter describes the last couple of months before launch where we desperately try to raise money.

· With launch date approaching the outlook becomes increasingly dim with nobody coming through to invest.

· The author is increasingly desperate. In the end Holte raises $3.55million at the last minute; just enough to launch the fund in a desperately small launch.

Part II: Becoming the Real Deal

Chapter 6: Mickey Mouse Fund

· After launching with a pitifully low amount Holte starts to put money in the market. First trade leads to embarrassing interaction with former broker who cannot believe the fund is that small.

· Chapter goes through a couple of funny examples early on where The author is confronted with Holte's very small size.

Chapter 7: Breaking Through

· After three months of running Holte Capital there are still no new investors in the fund. The author figures he has about 18 months without raising money before he will have to shut down the fund as he is out of money.

· Month four a bit of money starts to come in and assets go from $3.5 to $11mio. Floodgates have not quite opened but Holte is on the up.

· Chapter describes the breakthrough investment where one investor decides to invest $25million with a commitment to invest more. A hugely important moment in the history of Holte as company at one stroke becomes a profitable "hot" hedge fund.

Chapter 8: Scaling up and Meeting the Godfather

· With the new assets Holte starts to put more money in the market and attention from the brokers is cynically immediate.

· One Italian broker sets up The author to meet with the CEO of Mediobanca, perhaps Italy's most influential bank.

· The author describes the background to the meeting and the logic behind Holte's investment in Mediobanca. The reader is brought along to the meeting and shown the inner working of Mediobanca through down to earth and amusing anecdotes.

Chapter 9: The Real Deal

· This chapter describes life at Holte after our major investor makes Holte a respectable sized fund and the impact on Lars' personal life.

· Internally the people at Holte discuss how to spend their new found wealth on improving performance, while The author is keen to take some money out of the business.

· Holte comes close to being nominated for European start-up of the year and The author describes going to the award dinner as an "almost somebody".

Chapter 10: Being Corporate

· After significant growth Holte grows to almost $300million in assets under management and how investors have got over the fear of investing in a young fund.

· How we split the financial side of the business and how sharing profitability often leads to teams and hedge funds breaking apart. Something The author is very aware of since it had happened at the first hedge fund he worked at.

· The author discusses hiring additional people and how there was a surge of interest among candidates, almost like the internet bubble in the late 90s. Hedge funds can make you rich young and the lure of crazy money brought many more or less serious prospective hires.

· Finally Lars discusses the interview process and how he came up with some standard questions to test people's finance skills. Some of those questions are listed, giving the reader a chance to gauge the base level of skills Holte expected those that interviewed to have.

Chapter 11: Activist Investor

· The atmosphere at Holte and how the people are a quiet studious bunch without the often stereotype screaming matches and finance buzzwords.

· How the group goes about finding trades in a raging bull market where loads of people are chasing hot trade ideas, and how this search brings The author to a Swedish company that was going through a complicated restructuring.

· Holte becomes heavily involved in the restructuring of Bure. As a corporate activist Holte helps direct the actions of management to create more shareholder value. The author discusses the oddity of someone in his young 30s being in a position to control the lives of thousands of employees after only a few years in business himself.

Chapter 12: What we do

· This chapter goes through a "would be" description of a day for Lars. Starting with the early alarm clock and through a bunch of little typical daily occurrences the reader gets a good picture of what the day of a hedge fund manager looks like.

· With some degree of exaggeration The author contrasts his day at Holte to what it had been like as a young investment banker at Lazard Freres in New York where the analysts were verbally beaten constantly.

· Chapter describes scene from Lazard where a group of support staff witnesses The author being "screamed at like you were a dog" by a partner after making a mistake in a spreadsheet.

Part III: On the Front Line

Chapter 13: Getting Fully Examined

· This chapter describes how a potential investor gets within days of investing $100million in Holte Capital before their whole group is fired last minute.

· The author discusses how anyone who invests the amount of money will do serious due diligence on the manager and what funny and odd things various investors dug out about The author over the years, like the fact he had appeared in a fashion magazine.

· In a separate box The author describes what funds of funds are and why it may make sense for some people to invest in them despite the extra layer of fees.

Chapter 14: Blood in the Streets

· This chapter describes the London bombing seen from insider Holte Capital. Unlike 9/11 it is not immediately clear what has happened and on the day "oddly panic slowly unfolded".

· Lars' sister Anne who had been an intern at Holte over the summer is in the train behind the one that was blown up at Liverpool Street and unable to reach her The author panics until she turns up at the office after making her way back through a city in disarray.

· After the bombing The author creates a "disaster stock list" where Holte can sell millions of dollars of badly affected stocks if there is another attack. With the office location near some prime potential terrorist targets there is a chance Holte will be able to react quicker than the market and profit from the disaster. The author discusses the moral implications of this.

Chapter 15: Edge

· Edge is an incredibly overused but important term in the world of hedge funds. Basically it is the question of how you get ahead in the game of investment management where thousands compete. This chapter starts out by discussing edge.

· In a slightly more technical section The author discusses how Holte thought it had found edge through trading in the shipping sector and walks the reader through the logic behind those trades in some detail. The technical section is in a text box so those technically inclined can skip it.

Chapter 16: Made it?

· Having been a proper sized hedge fund for a couple of years Holte had clearly made it. The author discusses how this impacted his management style and how the firm was treated by the outside world. The early section of the chapter describes further how Holte compensated everyone and in that context explains how the really big money is made in hedge funds.

· The hunt for short term performance can be stressful and draining, but likewise it makes it hard to plan anything for the business. This section takes the reader through a couple of examples of this.

· In the final part of the chapter The author describes the scene of all the newly rich people in West London in the bull market years. The bar for "having made it" was incredibly high and the tasteless displays of wealth everywhere. The author gives the readers some funny anecdotes and explains how he clearly had become a part of the problem. He explains how he paid more for his kids to go to nursery school than he had paid to go to Harvard. It all made sense at the time.

Chapter 17: Friends and Competition

· The London hedge fund scene can be a fairly small world and in this chapter The author takes the reader on a small inside tour. The author explains how the managers often knew each other and gossiped about the performance and fate of others like a group of high school students.

· In the chapter The author tells the stories of a range of managers from some that failed miserably to Chris Hohn who several years in a row made hundreds of millions of dollars. The author takes issue with the misperception that all hedge fund managers are silly rich also discusses how an extremely talented and knowledgeable manager still went bust inside a year of his peak.

· The author describes the mercilessly harsh meritocracy at the fund raising conferences where those in demand rival Brad Pitt for attention and those less popular are left behind like the nerdy kid at the ball. In time The author got to experience both.

Chapter 18: Making your Commissions Count

· This is a very light chapter. The author describes how the brokerage commission system works. He discusses what firm like Holte got in return from its commission money ranging from research and company access to the often discussed forms of entertainment.

· The author takes the reader along to one of the largest industry conference, the annual TMT conference held by Morgan Stanley in Barcelona. The conference is the epitome of jostling for benefit from your commission dollars as all the investors try to meet with the hottest companies. The author explains how it all works.

· In the "Fun and games" section The author discusses sex, drugs, and rock n' roll. There is far less of it than many industry accounts suggests, but obviously still present. The author describes the scene of a massive annual fund raising event where £100,000 would buy you a tennis game with Tony Blair

Chapter 19: Are we Worth It?

· This chapter is all about fees. A random encounter leads The author to think about the crazy aggregation of fees and how it just can't make sense for people to invest in hedge funds through the often many layers of intermediaries.

· If a regular pensioner invested in a fund like Holte Capital through normal intermediaries and the fund had a very respectable 10% gross return the pensioner would still only be left with about 2.8% return, slightly above U.S. treasuries. Something will have to give. The author walks through the math in detail and explains how the bar for hedge fund investing making sense is incredibly high.

· The author contrasts the hedge fund fees with that of investing in an index fund and shows how $100 invested for 10 years with a 10% gross return in a hedge fund and index fund would have fared. The hedge fund would leave you with $133 and the index fund with $255. Considering this massive difference hedge funds have a serious explanatory issue.

Part IV: The Fast Road Down

Chapter 20: Feeling Grim

· Continuing the Holte narrative, co-founder Brian is burnt out and decides to quit Holte. This comes as a complete shock to The author and leads him to reflect on his own future as a hedge fund manager.

· After Brian quits The author sits down and reflects on what has kept him going. He makes a list of pros and cons that he shares with the reader. Cons include "Bubble – get out", "Impact on family", and "Markets can't be beat after fees". Pros include "You are a self-righteous clown" and "Where else would you make $4million per year".

· In final part of chapter The author shares a nightmare he has after shorting and thus hurting the stock of a company that does life-saving medical tools. The author' brother suffers from MS and The author dreams that his shorting of the stock means that a cure for the disease is not found.

Chapter 21: A Bad Day

· A watershed day in the story of Holte Capital. On this day one position had a shock profit warning and cost the firm $10million. The author takes the reader along for the devastating moments.

· Just as the day could not get worse The author gets a call from his kid's nursery that one of his children has gotten some metal stuck in her eye and that he will need to take her to the eye hospital. Running away from the office at a point of maximum stress The author reflects on how spent he is as a hedge fund manager.

Chapter 22: A Bad Run

· A Bad Run goes through the decline of Holte Capital. After the "profit warning" day a bad run of returns leads to investors questioning their investment.

· The author describes his failed fight to keep his company together and how a harrowing sequence of events leads his largest investor to redeem their investment in full.

· After the largest investor pulls out a cascading effect makes the other large investors also redeem and Holte Capital returns all the money as a result. This is effectively the closing of the fund.

Chapter 23: Going Home

· The final chapter describes the process of shutting down. The emotional hangover after intensive money management for almost a decade, but also relief at the prospect of a life after hedge funds.

· The author describes "our excuse" why Holte closed down – everyone has one. The timing of Holte's increase in gearing was unfortunate and meant that a relatively small loss became far more significant than it should have been.

· Drained from the Holte experience the author started the rest of his life on February 1, 2008. It was time to start the healing process.

Afterthought: Rethinking Holte Capital

[Not written yet]

· This section will discuss the lessons from Holte Capital. What happened? What was good and bad about it?

· It will discuss the fact that The author got rich from Holte Capital without really making other people a ton of money. This is symptomatic of the industry and clearly a problem.

· The section discusses where someone like The author goes after the Holte experience. What's next?

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