Customer Reviews

Money Mavericks: Confessions of a Hedge Fund Manager (Financial Times Series)

5 star:		(36)
4 star:		(6)
3 star:		(2)
2 star:		(0)
1 star:		(0)

 

 

Lars Kroijer provides the reader with an excellent portal into the mind of a hedge fund manager. Kroijer started his fund, Holte Capital, in the boom years of hedge funds with a few dollars and a lot of ambition. His book tells the tale of all the ups and downs (business-wise, trading-wise, emotionally-wise, partners-wise, etc) he experienced with Holte Capital. There is no shortage of hedge fund manager autobiographies for sale these days, and generally I avoid reading hedge fund manager self-promoting nonsense. However, in the case of Kroijer, an exception must be made. Kroijer is that rare animal who, made clear from his writing, is much too self-reflective and aware of the world around himself, to be comfortable in the hedge fund industry. Kroijer's book tells of the absurdness of the industry and its participants which only a critical outsider would be able to discern; all the while Kroijer is deeply ensconced in the industry trying to make a go of it. This book is not a frat-house tale of lurid sexcapades and drug fueled parties, rather the story is one of the inner workings of a humble self-reflective mind placed in an environment of near-sociopaths and their institutions. Kroijer's book is the one book about hedge funds which I believe is an enjoyable read for the non-hedge fund person. A book which industry outsiders can appreciate, and certainly a book which industry insiders need to read.

As much as it tells a story of a hedge fund manager, it tells a story of entrepreneurship, the fears and hopes that come with the roller coaster ride of every entrepreneurial undertaking. In addition to giving an honest, straightforward and down to earth account of the daily ups and downs of HF industry, the book surprises with Kroijer's humility and self depreciating humor. The discussion on investment allocation strategy from an individual investor perspective offers invaluable wisdom of a seasoned professional distilled to a simple set of rules. For anyone who has an investment portfolio, regardless of its size, this part alone is simply priceless.

I generally agree with the other positive reviews here so I won't waste our time repeating the good stuff others have said better than me.

If you are reading to learn about investing:
Holte Capital was a Europe-focused market-neutral special situations fund. Therefore the lessons learned here are NOT likely to be useful for retail investors, and most useful for students of spec sit/mkt neutral investing. It invested in stocks, debt, and warrants. Lars only details the specifics of 5 or 6 different trades in the book. It is pretty clear that his (targeted) 8-10% unlevered alpha was generated mostly in those trades where a listed company was trading for less than the sum of its parts - Holte's losing bets, at least those discussed in the book, were all international relative valuation trades (e.g. trading for low PE in this country compared to PEs in other countries) which in my judgement were far weaker theses. Lars probably moved into these trades once his AUM exceeded $300-500mm, a deadly example of mission creep. The trade that destroyed Holte is laid out in gory detail, and this story alone is probably worth the price of the book if it helps you remember the problems with gearing up 3.5x as Lars did in order to satisfy his investors. The book could have been better simply if it just detailed more trades, or went into more specifics about how Lars organized his analysts.

If you are reading to find dirt on the hedge fund industry:
You will be sorely disappointed. 1) Drugs, Booze, Women. As Lars says, we don't do drugs because this is a highly intellectual industry and we live and die by our ability to think quality thoughts. We do slight amounts of alcohol like everyone else. Women and clubs (as portrayed in the book) are actually just an affliction of brokers. 2) Ethics of Shorting. Lars spends a few pages in introspection on the ethics of shorting an overvalued but nevertheless essential medical services company - was that creating value? I personally think so, because the relative overvaluation of this company means some other essential medical services companies weren't getting the cost of capital they should be getting. Lars did not consider this point in the book. 3) After-cost fees. The typical dirt is that hedge funds, after fees, don't do better than the market. Lars spends more than a few pages detailing the after-fee performance of hedge funds. It turns out most of the fees are imposed by pension funds and funds of funds before your money even reaches hedge funds. The only reason for these intermediaries is your own inability to do your own investing so those are the guys you need to eliminate if you want to be fair to hedge funds. Lars even complains about 8bps commission charges from brokers as being high, but I wouldn't go that far. 4) Family and stress. Absolutely yes. Lars manages to almost miss out the first three years of his twins (not to mention his wife) and apparently physically ages 15 years because he is so involved with Holte. I wouldn't call that dirt though; that's simply how committed these guys are to investing their clients' money. Lars mentions the awe-inspiring feeling of being entrusted with large sums of money on more than a few occasions.

Final observation:
In the early chapters of the book Lars recounts an interview where he, fresh out of school, tells a hedge fund boss point blank that he doesn't expect that he can outperform the markets over time. In the closing chapters of the book (and in his interviews post-publication), Lars appears to be talking the same thing, after having earned what I estimate to be in the neighborhood of $10-30mm from his 6 year hedge fund career. I personally think it nonsense; many of the trades detailed in the book showed clear market inefficiencies, and despite being undone by a single -12% year his raw return of ~ -3% wasn't actually all that bad considering his past positive returns.

So while I disagree with him on certain takeaways of his career and wish he went into more detail in certain parts of the book, Money Mavericks was overall a great read.

Lars Kroijer has done a service by writing down some of his experiences starting a fund. It is an admirable effort. Hedge funds receive an inordinate amount of attention and yet few articles or books have been written by practicing professional hedge fund managers. Here is a rare chance to learn some of the luck, pluck, and brains that it took to make it in The CIty or Wall Street during the hedge fund go-go years from 1998-2008.

Lars has a slightly verbose style that devolves sometimes into dry reporting of events instead of a story. Overall the book is well written. But this isn't Michael Lewis or Adam Smith and you won't find yourself biting your nails too much here. The drama ends in a thud.

What is kind of unique are the small social insights that Lars allows the reader into the Richard Perry's, other fund managers, the fund of fund operators, the prime brokers and so forth. It would have been nicer if they were fleshed out more-- the parties, the attention, the champagne and the bespoke suits of Mayfair-- but the overall message of the book is that while colorful, the hedge fund business really is about a lot of people staring at screens, with perfect resumes, worrying about a lot of money. Sic transit gloria.

Excellent combination of a great personal story that keeps you moving through the book, and superb insight into the industry, explained quite simply. Lars keeps it totally down to earth while explaining the ins and outs of the sector, giving the reader funny anecdotes about his journey, and being serious about the maths of how hedge fund managers make money. Really enjoyable as well as informative.

Money Mavericks is a fantastic read! Well written, honest and informative, it is the pocket-sized handbook for anyone interested in starting their own hedge fund. Lars's credibility in writing this book is a crucial element to it's success. Not only had he worked in a wide range of other professional services before (investment banking, consulting and private equity) but he has worked at one of the top hedge funds as well (HBK). This gives him insight into the risks and rewards of the investment management business from a more complete perspective.

One of the biggest takeaways I got from this book was the sheer volatility of being a fund manager. Not only in your own returns but the level of capital you have. Holte went from from being a $50MM fund to a $1Bn in a space of less than 5 years. What other industry sees 20x growth but then potentially could see that all evaporate the next year?

Lars is also honest about the challenges facing the money manager and it is a sobering and thoughtful reflection on the over-hyped world that we see in the popular press.

The book has many truly unnecessary details, like personal life and emotional experiences. In the same time it lacks an insight into management process and investment strategies. But it is alright, because it means that the book content is consistent with it's name: it is really a confession, and written primarily for the sake of the author himself, and not the readers.

I just finished this book and enjoyed it immensely.

An easy read (even for those of us not in the finance industry) and the author's dry wit certainly came through. But most of all, I appreciated his candor on the ups and downs of starting a company and the hedge fund business in general. Too often, Finance is portrayed as a "masters-of-the-universe" type industry. Lars doesn't do that. Rather he shows us that it is about real people trying to create a real investing advantage, and with enough self-awareness to know that the task may in fact be impossible. There is far to much hype out there (on any given topic) so I find it very refreshing to hear the straight goods.

It's easy to read in a single sitting -- incredibly insightful, clear and honest. Lars does a terrific job exposing us not only to the world of finance & hedge funds but also to his personal and emotional path along the way. Highly recommended.

In his first book, Lars Kroijer takes you on a highly entertaining and insightful rollercoaster ride through hedge fund land. As one of only a handful books about the industry written by an actual manager you will learn as much about being an entrepreneur as you will about hedge funds and investing. Lars strikes a nice blend between amusing anecdotes (business and personal) and lessons about investing. Of particular interest for me was the chapter on the impact of fees on investment performance and what you should do with your money if you acknowledge that, like most people, you do not have edge (or know anyone who does). All in all a highly recommended read.