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Jared Dillian
Traders Magazine Online News

Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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August 31, 2004

Barton Biggs, the Hedgie: Famed Market Strategist Spies a Wide World of Riches

By Kathryn M. Welling

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  • Barton Biggs, the Hedgie: Famed Market Strategist Spies a Wide World of Riches

How to introduce Barton Biggs? Why bother, especially to an audience of institutional investors? Traxis Partners, the $2 billion global asset allocation investment group the erstwhile dean of Wall Street market strategists runs with two former Morgan Stanley colleagues, Cyril Moulle-Berteaux and Madhav Dhar, celebrated its first birthday on June 1, having produced a 21.6 percent gain in its first sub-calendar year of operations. This year, they've been "struggling mightily," says Barton, as have most investors, to stay basically flat, but he still evinces confidence that Traxis's yearend results will be reported with a plus sign. What better reason to give Barton a call?

-KMW

Barton, you sounded pretty disgusted about something when you picked up the phone the other day. Hope it wasn't my call.

No. It's just that, obviously, the market isn't as much fun this year. At least, not from the perspective of running a hedge fund. It seemed a lot easier to identify anomalies and to put on successful alpha-creating trades than it is this year.

You wouldn't have it any other way, would you? After all, you could easily hit the beach if you so chose.

Yes. I mean, I must be "mentally challenged" or something. I am definitely not interested in golf and I have climbed all the easy mountains in the world. And, if I try to climb any of the hard ones, I am likely to injure myself - which is no fun, either. So investing is the only game where age doesn't really hurt you.

Frustration seems to be the rule, even - or maybe even especially - among hedgies. How ironic is it that you wrote that very widely distributed piece a year or so ago predicting a bursting of the hedge fund bubble - and now your fund and most of the rest are becalmed, instead?

I continue to be haunted by that particular piece, which I wrote about hedge funds and hedge fund bubbles. In it, I made reference to what I still believe: The hedge fund industry is prone to bubbles in its various sectors. If a sector is hot at the moment, a bubble is quickly created in that sector. But virtually by definition, when a sector gets hot, it is because there are not a lot of people working it and there is a comparatively substantial amount of potential return, or alpha, in it, so the few practitioners generate very high returns. The problem is that those high returns to the few almost immediately attract a big inflow of money into the sector, and the big inflow of money acts as a magnet, pulling a whole new group of practitioners into the sector. We are now witnessing a major evolutionary change.

What makes you say that?