“More Money Than God: Hedge Funds and the Making of a New Elite”

“More Money Than God: Hedge Funds and the Making of a New Elite”

Sebastian introduces new ideas and debates criticisms without ever skirting myopia. The LTCM and Quantum (George Soros) chapters are especially good, but reading any less than the entire book would be doing yourself a disservice. And this is coming from someone who took three years to finish reading it.

It's a testament to the merit of Mallaby's book that I now have some sympathy for financial traders. Up to this point, the books I've read about Wall Street have all been scathing. Let us know what’s wrong with this preview of More Money Than God by Sebastian Mallaby.

Mallaby describes various hedge funds and their effect on markets, often explaining how these hedge funds defied the ‘laws’ of finance. Indeed, it is illustrated how hedge funds managers were able to generate above-market returns by finding statistical anomalies, patterns, asymmetrical bets, and sometimes by ‘simply’ picking the right stocks to invest in. His point is a fair one- hedge funds are real, unfettered capitalism, that you get the benefits of a large instituional investment bank with much less of the moral hazard. Hedge funds create wealth (like investment banks), their traders get paid a significant cut of their earnings (less like an investment bank) and no independent hedge fund has ever been bailed out using taxpayer money (entirely unlike investment banks).

Mr. Mallaby could have performed a public service, then, by showing more interest in the seamier side of the hedge-fund industry, like the collapse of the Bayou Group in 2005 and its officers' guilty pleas to fraud charges. But if "More Money Than God" is not as well rounded as it might have been, it is still the fullest account we have so far of a too-little-understood business that changed the shape of finance and no doubt will continue to do so.

I always thought of hedge funds as the private playground of multimillionaires, which help the wealthy to become even more wealthier. Nevertheless, Mallaby proves that there is much more to the overall story of hedge funds. He does a great job by walking his reader through the history, development, types, boom and bust cycles of hedge funds, also explaining their role and impact to the health of the global financial system. So, though Mallaby doesn't get into this, perhaps there are a lot of small hedge funds that remain small and refuse to disclose anything about themselves because doing so is the only way that they can continue to beat the market.

Even if one has a diametrically opposed view towards hedge funds, one can still appreciate the thorough research and fine writing style. It is one of the rare occasions where a book truly deserves five stars.

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Hedge funds’ gargantuan appetite for instruments with which to bet against subprime mortgages helped to create this vast market of wagers that is as faintly connected to real assets as a card game in Vegas is. Mallaby doesn’t examine this casino capitalism, and that makes his robust advocacy of hedge funds incomplete. A fascinating book, it explains recent economic history (lots of events that I lived and worked through), basically through the lens of the strategies that different hedge funds were running at the time. The air of secrecy does stir curiosity, though, which is why the bright light shed by "More Money Than God" is particularly welcome. Mr. Mallaby, a fellow at the Council of Foreign Relations and an expert on global economics, brings a keen sense of financial theory to his subject and a vivid narrative style.

Five additional stories on equally fascinating subjects round out this wonderful collection that will both entertain and inform readers . Business Adventures is truly financial journalism at its liveliest and best. But none of the character portraits in "More Money Than God" is more captivating than the one of Alfred Jones, the father of the hedge-fund industry, who died in 1989. In Mr. Mallaby's telling, Jones was an erudite dandy, a onetime Marxist who hiked to the frontlines of the Spanish Civil War with the writer Dorothy Parker—where they shared a bottle of Scotch whisky with Ernest Hemingway. First, hedge funds often trade against people who are buying or selling for some reason other than profit.

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• This book contains the tales (though keep in mind, all these are real, with verifiable sources) of hedge fund managers, from start with A.W.
• His point is a fair one- hedge funds are real, unfettered capitalism, that you get the benefits of a large instituional investment bank with much less of the moral hazard.
• As he shows in more than a dozen interlocking stories, the history of hedge funds is a history of the men who were able to spot market opportunities others missed, and who were prepared to gamble a fortune on their convictions.

For example, if a hedge fund borrows $9 for every $1 it owns, a gain of 10% in the underlying investment can result in a 100% gain in capital. But the fund's invested capital can also be wiped out by a 10% loss in the underlying investment. Between 1990 and 2007, hedge funds earned roughly 14% annually, according to Hedge Fund Research Inc.

If the book has a big idea, it is that hedge funds are an overall boon to Wall Street. Wealthy, powerful, and potentially dangerous, hedge fund moguls have become the It Boys of twenty-first- century capitalism.

This relative anonymity is due to the secretive nature of most hedge-fund managers, an obsession that makes them mysterious and often the subject of conspiracy theories. Hedge funds do wish to avoid scrutiny of their trading activities—but there is nothing particularly nefarious about this. Mr. Buffett himself has a special deal with regulators to delay disclosure of his stock investments, preventing copycats from piling on before he is finished buying. Despite their heft, hedge funds—and the fund managers who take healthy fees for their work and who have become the "new elite," as Mr. Mallaby calls them—have remained something of an enigma.

If you enjoy the financial markets, I suspect you will greatly enjoy this book. To ask other readers questions aboutMore Money Than God,please sign up. Finance professors have long argued that beating the market is impossible, and yet drawing on insights from physics, economics, and psychology, these titans have cracked the market's mysteries and gone on to earn fortunes. Their innovation has transformed the world, spawning new markets in exotic financial instruments and rewriting the rules of capitalism. You can read books purchased on Google Play using your computer's web browser.

Yet they managed risk better than banks, investment banks, insurers, and so on—and they did so without a safety net from taxpayers. I think that the more interesting aspects of this book trace the way that the growth of hedge funds has affected modern finance and political economy. Here, Mallaby is much shrewder, and he also advances a provocative thesis--despite all of the opprobrium they attract, hedge funds are fundamentally productive contributors to our economy in ways that, say, the big investment banks and rating agencies are not.

More Money Than God combines fine research with a pleasurable writing style, and Mallaby does not eschew from giving his opinion on the subject matter. I did not always agree with his opinion, but he clearly expresses how he arrived at his conclusions. This makes for a pleasurable read, as it forces the reader to think critically about what the author is stating.