Book review: Hedgehogging

Who should read it
Serious investors will be drawn to this behind-the-scenes look at a successful hedge fund manager’s exploits.

Synopsis
In “Hedgehogging,” author Barton Biggs gives the reader a rare look inside the minds of some of the greatest money managers on earth, including his own. Biggs spent 30 years with Morgan Stanley, building up its investment management department and serving as the chair of the firm.

At various times during his tenure, he was ranked as the No. 1 U.S. investment strategist by the “Institutional Investor” magazine poll, and from 1996 to 2003 he was ranked as the No. 1 global strategist. In 2003, Biggs formed Traxis Partners, a hedge fund that now has more than a billion dollars under its management.

With hilarious anecdotes and laugh-out-loud descriptions, Biggs takes you on a tour of big money and power.

His description of some of the people who invest in hedge funds is quite frank and reminds us that not everyone is cut out for this volatile business. At least 2,000 hedge funds have closed since the end of 2004, and probably 2,500 new funds have opened. The stress to perform is tremendous and Biggs gives us an idea of what it’s like for most hedge fund managers, since there are relatively few who are successful for long periods.

“There is an investment black dog and when you are doing badly, it comes and sits on your chest in the middle of the night, and on Saturday mornings, and on sunny spring afternoons in the office. It’s almost impossible to banish the dog when he gets on you. He plagues your life.”

Strong/weak points
Biggs gives the reader a view of the money management business most of us will never see. He presents us with many examples of successful managers: eager young men (Biggs points out that there are very few, if any, women hedge managers); grizzled old men; gregarious athletic men; lean, serious academic men; and even a pretentious British lord. But along with the successes, there are people who have ridden the hedge fund highs only to be eaten up and spit out by hedge fund disasters. In Biggs’ own words: “We harbor dreams of magnificent profits, but then, buy some quirk of fate, suddenly your intriguing new love transforms into a dark, irrational beast that turns on you with savage fury.”

This book is not aimed at the novice investor, but anyone who wants to read a good story about the people who make up this crazy hedge fund business will find the book entertaining. Biggs’ writing is intelligent and witty.

Takeaway
“Hedgehogging” is a must read for investors who have their financial house in order and are considering adding a hedge fund to their portfolio.