Hedgehogging
By Barton Biggs
John Wiley & Sons Inc.
320 pages, $26.95
REVIEWED BY NELSON FREEBURG
In this engaging book, part memoir and part essay, Barton Biggs shares observations from a long career on Wall Street along with his unique perspective on hedge funds. Biggs, who started his first hedge fund 40 years ago, brings authority to the subject.
“Hedgehogging” has sparked a good deal of buzz. A recent New York Times headline asks: “Want to Start a Hedge Fund? Read This Book First.” Indeed, a key Biggs theme is to be careful. Biggs notes, for every new hedge fund formed, another closes down.
What makes this book so touching is Biggs’ acknowledgment of his own anxieties as a hedge fund manager. In 2004 Biggs shorted crude oil at $40 per barrel. As the market shot higher, Biggs added to the short position. The mounting losses hurt his portfolio, his well-being, even his social standing.
Biggs writes,“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.” The pressure is unremitting. Struggling to raise startup capital for a new hedge fund, Biggs and his partners hit the institutional sales circuit.
Shifting focus, Biggs shares his opinions on a range of investment matters. He favors value investing vs. growth strategies and fundamentals vs. technicals. He has doubts about market-neutral funds, precious metals, Fibonacci patterns and contrarian investment tactics. Above all, Biggs is skeptical of investment companies run by businesspeople bent on gathering assets as opposed to traders seeking absolute returns.
Adding texture to the discussion, Biggs recalls encounters with luminaries from Wall Street and beyond. Financier Gerald Loeb shares his personal memories of Jesse Livermore. T. Rowe Price tutors Biggs on the merits of growth stocks. Sitting on the board of Tiger Management fund, Biggs finds a friend in fellow trustee Margaret Thatcher.
Biggs deftly weaves in quotes from Yeats, Shaw and Robert Service. His wit is dry and self-deprecating.
All in all, this fine book stands as one of the most compelling financial memoirs of our time.
Nelson Freeburg is editor of Formula Research, a financial letter that builds and tests quantitative timing models for stocks, bonds and commodities. Formula Research serves systematic traders and institutional money managers in 27 countries.
