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March 18, 2010

Review: Timing is Everything

Book on hedge funds sheds light on an era of excess

By Michael Scotti

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Diary of a Hedge Fund Manager" is really an amazing story. Through hard work, a middle-class kid from Thunder Bay, Ontario earns a hockey scholarship to Yale University, gets a job in equity sales at Credit Suisse during the height of the craze and moves to a hedge fund as a junior analyst within a year. Three years later he is earning more than

$1 million a year as a portfolio manager.

Author Keith McCullough's book covers a time in Wall Street history that still staggers the mind, a period when the United States went from one era of excess to another--from the Internet to the housing bubble. One byproduct of the times was the hedge fund bubble, which McCullough admits he benefited from.

The mania and froth of the times were so great and blinding, that at one point, after McCullough reaches seven figures in annual compensation, he recounts how he reset his next goal to $10 million a year. Not bad ambitions for a 27-year-old. McCullough admits that luck played a role in his meteoric rise, but there was also hard work and design, he says--he kept his edge by writing a daily journal of various indices and economic figures that he memorized. This helped him spot trends in the market.

With the help of Rich Blake, a veteran Wall Street journalist with a thick Rolodex, McCullough takes the reader through his brief, but successful career in hedge funds. By fall of 2007, when at the wizened age of about 31, it was all over--McCullough would be gone from the hedge fund industry for good. He lost his job at Carlyle-Blue Wave Partners because he was bearish too soon.




"Diary of a Hedge Fund Manager" is an easy read. It offers context about the hedge fund industry and hedge funds' role in the financial crisis. It demonstrates the growth of hedge funds with facts and figures. It also gives a quick history of the business, while reciting the litany of past and present-day superstar managers. The book accomplishes its goal: It explains hedge funds through the eyes of a former manager.

This is not a tell-all book--far from it. It is one man's story. You won't find any stories about individual hedge fund managers by name--except for "the Giant." He is an anonymous fat-cat manager whom McCullough sees on a flight stuffing his face with caviar while McCullough pores over reports.

The shortage of stories might be chalked up to McCullough spending long days researching his investments--in the office by 5 a.m. and on the road constantly for company meetings.


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