Tuesday, July 03, 2007

The Case of the Curious Hedge Fund, and Other Tales

So I read about Trillin's insular Canadians before I read about Tina+Diana. I might read the whole book someday.

The Taguba article was awful news, to be sure, but I had a hard time following it and I'm not sure whether Hersh needed more editing, or less.

And Alex Ross was a pleasure to read, though I wished he'd taken it a little more slowly too. Kind of a breathless pace for an orchestral road trip, rather than a contemplative one.

I have to say, I kind of liked Acocella's historical turn in her reviews of recent Romeo+Juliet and Swan Lake productions.

All in the June 25 New Yorker.

But the real surprise in my recent reading was John Cassidy and The Case of the Curious Hedge Fund. From, I think, the July 2 issue. Fascinating. The thing I loved most was that while I was reading I gained a pretty clear understanding of how the hedge fund simulator worked, though what a hedge fund was or how it worked remained shrouded in darkness. As it should be.

The story begins with a Dutch economist, blindfolded and thrown in the back of a speeding limo:

"Kat, a forty-three-year-old Dutch economist, had recently left a high-paying job at the London office of Bank of America to pursue a career in academe. He didn’t know much about hedge funds, but he agreed to be interviewed by an executive at the firm. Hedge funds are privately owned financial companies that raise cash from very wealthy individuals and institutional investors, such as pension funds and charitable endowments. Unlike banks and brokerage firms, hedge funds are largely unregulated, which gives them considerable latitude in investing their clients’ money."

He's heard the rumors, seen the heavies on the street:

"Hedge funds go to great lengths to maintain their mystique: Simons and other managers rarely grant interviews, and the mostly young analysts and traders who make up the funds’ staffs sign confidentiality agreements barring them from discussing their work. The public, denied information about the industry’s methods, has focussed instead on the conspicuous spending it has enabled, seeing in the life styles of the funds’ managers proof of their ingenuity. Steven Cohen, the founder of SAC Capital Advisors, lives in a thirty-two-thousand-square-foot house in Greenwich, Connecticut, and last year reportedly paid $143.5 million for a painting by Willem de Kooning."

He barely makes his escape, to plot revenge (with his trusty technologically savvy side-kick) from the groves of academe:

"Kat, realizing that it would be nearly impossible to determine the trading strategies of individual hedge funds—the companies would never agree to divulge them—decided to study their results instead. Hedge funds aren’t required to file quarterly reports with the Securities and Exchange Commission, so it isn’t easy to get accurate information about their earnings. However, several financial-publishing companies now collate data on monthly returns which hedge funds supply to them voluntarily, presumably in order to impress potential investors. The databases that these publishers have assembled are neither complete nor entirely reliable, but they include information on thousands of funds, some of it dating back to the nineteen-eighties."

The rest you have to read for yourself. I wouldn't want to spoil the suspense.



Anonymous hedge funds said...

I find it interesting, I enjoy reading this article. However I hope to see more improvement on the Hedgefund regulation. Thanks for sharing.

3:55 AM  
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2:56 PM  

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