- ISBN13: 9780470529720
- Condition: NEW
- Notes: Brand New from Publisher. No Remainder Mark.
Product Description
Fast paced romp through the world of hedge fund mania Diary of a Hedge Fund Manager is an insider’s view of the high stakes money management world. In a distinctly straightforward, and at times humorous narrative, Keith McCullough and Rich Blake take you on the journey of a young and successful hedge fund manager and former junior hockey player from Thunder Bay, Ontario as he gets recruited to the Ivy League, stumbles on to the nexus of the hedge fund universe, and then gets a crack at running his own pile, becoming one of the best portfolio managers on the Street. But when the young portfolio manager finds himself working for one of the world’s most prestigious firms-helping to run their hedge fu… More >>
Diary of a Hedge Fund Manager: From the Top, to the Bottom, and Back Again
Many reviews seem to laud the author as a hero. I don’t understand why. He went into a business whose point is to make as much money as possible for oneself, with little regard for benefit to mankind, and did well for himself, without, in fact, being a particularly stellar manager (the author is absolutely right that there was a bubble in the industry, since otherwise people without any visible talents [except that for screwing his partners, as the author readily admits -- he also admits to remorse, but, except to catholics among us, regretting your questionable acts does not actually make them right] would not make [as the author boasts] eight figures). Having made this money, he neither gave it all to charity, nor used it to sail around the world, or buy tickets on the space shuttle, or spend the rest of his life playing golf at Pebble Beach, but instead, started (as far as I can tell) a “mock hedge fund”, which produces analyst’s reports, and runs a paper portfolio, which, to me, seems about as interesting as playing poker for matchsticks. I am in the industry myself, and to me this book was interesting, because the author is exactly the opposite of the cerebral types who I know, and interestingly, in the author’s circle, the primary qualification seems to be involvement in organized sports (primarily hockey) — this may be the American way, but it may also be why Renaissance is eating these guys’ lunch. The author seems to think that the usual 2 and 20 fee structure is unreasonable, but he should speak for himself: my reaction (as a professional) to his comment (relating to his own short-lived hedge fund), that he “never used leverage” is: who is this guy? If you are not capable of risk-managing a leveraged porfolio you SHOULD be running some mutual fund with a 50 basis point cost ratio. Just hope people give you a few hundred million…
The author’s tale of growing up in Thunder Bay is not very relevant, except for character development. Character development is a fine thing for a work of fiction. Less so for what is supposed to be “an inside look at the secretive hedge fund industry”. I should say that I (as a student in Toronto) have met many people from TB, and not a one who actually wanted to go back there — the author appears not to be a counterexample (he lives in CT, as far as I can tell), but despite this talks about his home town in misty tones (he also talks of his father in misty tones, but in fact it appears that his promising hockey career was derailed due to following his father’s bad advice).
In any case, to me this book was of some interest because it gave me somewhat more understanding of jocky sell-side salesmen than I had previously had, but I fail to see any other benefits. If you want to understand the trading business, you are better off reading Reminiscences of a Stock Operator Annotated Edition. If you want to understand the causes of the financial crisis (and the reason why so many funds were overleveraged), read Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics Rating: 2 / 5
I thoroughly enjoyed reading this book. One of my favorite parts was Keith walking into Yale for the first time with his cutoff denim shorts!
The book is an inspirational personal experience by a great risk manager. Keith demystifies the hedge fund world and shows that hardwork and heart payoff.
Bennet Thonakkara,
Regent Wealth Management Group
Rating: 5 / 5
When I was seeking a job in finance out of college almost twenty years ago, a popular question asked in interviews was: “What books have inspired you to seek out a job on Wall Street?” The most popular answer to that question was arguably Liar’s Poker by Michael Lewis, a chronicle of the rise of Salomon Brothers in fixed income and particularly mortgage-backed securities. The events and personalities in Lewis’ book were larger than life and drew many young, talented people to the business like moths to a light. Starting now, I expect that when the same question is asked on college campuses and board rooms in New York, Greenwich, London, and Hong Kong, a new popular answer may be this book, Diary of a Hedge Fund Manager by Keith McCullough. In telling his story, McCullough may end up inspiring a whole new generation of Wall Street achievers and innovators. He may also succeed in tipping a few sacred cows and instilling new paradigms for investing before all is said and done.
For starters, McCullough was not born into this business. He grew up in Thunder Bay, Ontario, more of a feeder for the NHL than for the hedge fund world. But the years he spent shivering through early morning skates and fighting for the puck, pursuing his dream of someday playing for the Toronto Maple Leafs, taught McCullough that “preparation trumps all else.” This is a lesson that has carried him far. As an undersized junior player, he became known as the “Mucker” given his aggressive play at both ends of the net and his propensity for “chirping” at opposing players and coaches. This determination and relentless work ethic would lead him to Yale, where he helped spark a historically underachieving hockey program to the league championship and obtained an economics degree along the way, and then to Wall Street. The account of Keith’s interview with Lehman Brothers is a story that will be repeated for the ages (no spoilers here). His first full time position, on the trading desk at Credit Suisse, placed him at the pinnacle of the dot-com bubble, and from there he would rise meteorically – from Dawson Herman, to his own hedge fund, to startup colossus Magnetar, and finally to Carlyle. All the time, McCullough was driven by hard work, determination, and a mind of his own.
It is this last boldface phrase that helps to explain why McCullough’s book is more than just a modern-day Horatio Alger story with a silver lining and why his work may prove to be revolutionary. The book makes clear the value of not pulling punches and sticking to one’s convictions. At Carlyle, being right too early was being wrong to the powers that be, and McCullough was sent packing even though his call to short the markets given the hedge fund bubble that he spotted in mid 2006 would prove to be correct. Early in his career, Keith learned that “stocks don’t lie. People do. If you confuse popular consensus for an honest research process, you’re setting yourself up for failure.” The events of 9/11/01 taught McCullough to focus on risk management and macro factors, and unlike many who give lip service to such things, it has become a primary focus in his work. The man has the marble composition notebooks loaded with observations to prove it. Now, with this book and his new research firm, Hedgeye Risk Management, the guy who used to engage in fake cell phone conversations in order to avoid group think conversations with other buysiders at conferences, illustrates how important it is to have a mind of one’s own in order to make money and preserve capital.
This may all sound like common sense and yet, McCullough stands above his former peers for several reasons. First, he not only refuses to buy into the group think of the “hedge fund mafia” but he also sees the value of shooting against it when it causes stocks and markets to become too frothy. Others have trouble doing this because a) nothing feels worse than having the crowd win (and outperform) while you shout into the wind (witness McCullough’s own pain at being too early to be short in mid 2007), b) when smart people invest a lot of time and energy into getting to know management teams and crunching numbers, it becomes hard to let go of an idea even if mitigating circumstances warrant it, and c) hedge fund managers get paid for stepping on the gas and staying in their “high conviction” ideas. McCullough identifies these behavioral factors and he runs with them in his work as others cower, stammer, and engage in denial.
Second, McCullough is unique in knowing that the investment process must consider duration. His macro bent enables him to make these distinctions and thus trade and manage risk effectively while others pile into investments despite adverse market conditions because “they don’t want to miss a move.” For example, a manager may buy gold despite it being a crowded long trade, overbought, and subject to clear deflationary headwinds that are emerging in the short term, because their long term thesis is for higher inflation over the next several years. It is this sort of thinking that got the hedge fund giants into trouble in 2008, and may prove to be their undoing again unless they learn to heed McCullough and manage this duration mismatch more effectively. McCullough can do this because from the outset, he knows how to define a trade, a trend, or a tail. Read the book and you will get the wherewithal to know how to do this too.
Third, McCullough is fearless in admitting when he is wrong, and trumpeting when he is right. His transparency and accountability in a world that is otherwise intentionally and defiantly opaque separates him from the crowd, and hopefully, inspires other practitioners and would be hedge fund giants to do the same.
Fourth, McCullough truly works as hard and as effectively as anyone out there. He is smart enough to know that merely being smart is not enough in a dynamic world of markets that never stops moving. This means keeping sharp and hitting the ground before anyone else every day. He realizes he is better than the rest as he watches a so called hedge fund giant on a flight to Hong Kong snoozing and gorging on caviar, while he, the upstart from western Ontario, takes the time to read and strategize his next moves. If this does not inspire the future movers and shakers of Wall Street to push themselves harder, I don’t know what will.
For the sake of full disclosure, I am no stranger to Keith McCullough. I had the pleasure of working with him for his first four months at Magnetar Capital, and we remain friends. Over the past ten and a half years, I have had the pleasure and honor of working with some of the brightest, most talented, and hard working men and women in the hedge fund industry, and even among this august group, the lessons and inspiration that Keith imparted to me over a short period of time stand out. With this book, and with [..], the reader (and the Wall Street interview candidate) may now be so inspired. I cannot endorse this book highly enough.
Michael Block
February 15, 2010
Rating: 5 / 5
McCullough is this generation’s every man. From humble roots in backwoods Canada to the center of the hedge fund universe in New York City, his journey is one we can all relate to on different levels. As he and Blake weave this tale, they also educate the reader on the inner workings of the hedge fund universe from the eyes of a true insider. Along the way, we also meet such compelling character as “Jonesy”, “Frenchie”, and a German son of a textile manufacturer, “Blum”. This story travels the decade and history of the hedge fund, one of the most dominating financial forces in the markets and global commerce today. This is a highly recommended read for anyone looking for an inspiring story, or general background on the secretive world of hedge funds. Rating: 5 / 5
I’ve read lots of history books from Liar’s Poker in investments to Military history and there is a certain historical “flow” that a book must give to not give the reader a feeling that you’re constantly stopping and going like a car in downtown during rush hour. This book has that stop and go feeling with constant interruptions and non-critical background information that makes it hard to read.
For example, the author constantly is telling about some hedgefund manager and no matter who it is feels it necessary to go back and give about a 1/2 page of history on this person right in the middle of any plot or development.
Content-wise it’s great insight into how a hedge fund manager is developed and thinks. For example, you get a great insight into the greed at any cost mentality when the author chooses more money at a competing hedgefund vs ok money and good working relationships at his current hedgefund. And you get to see the end result which I won’t spoil here…
I bought this book because I develop consumer and professional investment software products and knowing everything you can about the end consumer is a must. This is a rare book that offers such an insight. However, writing-wise the author needs much more work – maybe a second edition can fix it.
Overall I give it 2 stars for its content but subtract 3 stars for it’s difficult to read style. Rating: 2 / 5