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Hedgehogging

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Hedgehogging

Wiley,

15 min read
10 take-aways
Text available

What's inside?

Extraordinary reminiscences and revelations of a Wall Street global strategist and hedge fund operator.

Editorial Rating

8

Qualities

  • Innovative
  • Well Structured
  • Background

Recommendation

Hedgehoggers come in different sizes and personalities, and their results swing widely from high levels of success to abject failure. Hedge-fund investing is only for rich people and institutions; however, these funds play an important role in the stock market and the economy. Author Barton Biggs is a cultured, high-level money manager and global strategist. After 30 years with Morgan Stanley (which took public exception to parts of this book), he raised substantial capital through his wealthy family and investors, and entered the hedgehogging jungle. He describes the field both coldly and romantically. He is an effective raconteur, especially when he details war stories about Wall Street’s unethical, double-crossing maneuvers, and strange but wealthy characters. getAbstract recommends this book for its smooth, dramatic writing about hedge funds, their context and the players who run them.

Summary

How John Maynard Keynes Started Hedgehogging

In its simplest form, hedging consists of shorting a long position with leveraged credit in an attempt to “beat the market” averages. The first hedgehogger in the U.S. was Alfred Jones, who set up a long/short fund in 1940 to invest for his wife, and eventually opened it to include public investors.

Long before Jones, the famed English economist John Maynard Keynes became the original hedgehog. Keynes undertook the complexities of hedging around 1915. He used substantial debt (leverage), and held long and short positions in currencies. He made his first big money by “selling sterling short against the dollar, but [selling] long the pound against the mark, the franc and the lire.” Emboldened by this, he and his broker raised a substantial amount from friends and family, and formed what was, in essence, the first hedge fund. From its start in l920 until its second month of operation, the fund showed a profit of more than 20%. Then Keynes made the mistake of taking a spring vacation. When he returned, he was in trouble. The weak currencies had rallied and wiped out his leveraged fund.

His investors still respected his...

About the Author

As a young Yale student, Barton Biggs was turned off by his stock-picking relatives and headed for creative writing. Yet he got to Wall Street. Within four years Institutional Investor’s poll ranked him as its top global strategist. He is a principal in a hedge fund, managing “well over” $1 billion.

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