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June 3, 2013

Addicted to the Lifestyle

The Days and (Wild) Nights of a Young Buyside Trader

By Peter Chapman

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There's a telling scene about two-thirds of the way through Turney Duff's brutally honest memoir about his life in "The Buy Side." The author, then the head trader for hedge fund Argus Partners, and a couple of Banc of America Securities traders are waiting for a table outside the French bistro Pastis in New York's meatpacking district.

In an attempt to convince the waitress he should be seated immediately, Duff tells her, half-jokingly, "I don't think you understand. I'm on the buy side." The waitress expects an explanation, doesn't get one and declines to seat him until the rest of the party arrives.

"But I'm on the buy side," Duff pleads.

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Insiders who read this insightful, if sad, tale of trading and drug addiction will get the joke immediately. If you are the head trader at one of the largest hedge funds on Wall Street, you are about as close to royalty as any American can get.

Duff, who worked as a trader at three hedge funds between 1999 and 2009, exalted in the after-hours revelry and the related sellside adulation. By contrast, he did not seem to enjoy the day-to-day of the job.

Due to the large number of orders he doled out every day and the presumably large per-share fee attached to them in the pre-algorithmic days, Duff was one of the most coveted customers on the Street. "You're on every guest list, the tab is always picked up, and you're invited everywhere by your new 'best' friends,' " he writes.

As for the actual job, however, "when you strip away the private jets, floor seats, limousines, and parties from the buy side, all you're left with is the job: buy and sell tickets, salesmen, and ticker tapes," he writes. "Work is just that: work."

With thousands upon thousands of small money management firms in the U.S., most "buy side" traders can only dream of the white-glove treatment from sales traders. It helps to work for a large hedge fund with high turnover.

Duff did. After graduating from Ohio University, the Maine native spent five not-very-happy years in Morgan Stanley's retail brokerage division, waiting for his big break. It finally came in 1999, at age 30, when he signed on as a health care trader at Galleon Group.

The hedge fund, founded by former Needham & Co. executives in 1997, grew rapidly to become one of the largest hedge funds in the world. Galleon reached $7 billion in assets before its abrupt closure in 2009. That year, chief executive Raj Rajaratnam and five others were arrested and indicted on charges of fraud and insider trading. Rajaratnam and trader Zvi Goffer are now serving terms of 11 and 10 years, respectively, in federal prison.