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.
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.
Nevertheless, it was Galleon where Duff learned to trade. “Traders at hedge funds can be divided into two categories,” he writes. “Either you’re an execution trader or a proprietary trader. For most of this time [at Galleon and Argus] I’ve been an execution trader. An execution guy’s primary job is to not fuck anything up. You follow instructions from analysts and portfolio managers as literally as you can.”
While he earned his stripes at Galleon, it was his next job that made him the toast of Manhattan and where he started to earn serious money. In 2001, Galleon co-founder and chief health care analyst Krishen Sud bolted from Galleon to form his own hedge fund, Argus Partners. Duff tagged along as head trader, starting at $150,000 per year and 5 percent of the profits.
The $1 billion fund was Duff’s ticket to the high life. He would go out just about every night with sales traders, hitting the clubs and restaurants of Manhattan, drinking and doping into the wee hours. He developed a seriously bad coke habit, often acquiring his supply from sales traders.
Meanwhile, his income soared. In 2001, he earned $600,000. In 2002, he rented a huge apartment in Tribeca with his buddies for $9,300 per month. In 2003, his bonus was between $700,000 and $800,000. In 2004, he bought a co-op in Tribeca for $1.75 million and moved in with his girlfriend. In 2005, his bonus was $500,000.
It’s a wild ride, but like all good rise-and-fall stories, there’s a smash-up at the end. By 2006, Duff’s a bona fide cokehead. He stays out all night. He trashes his relationship. He falls down on the job. He calls in sick repeatedly. Eventually, he quits and goes into rehab.
He makes a comeback, but…
Is there a moral here? Maybe. But Duff doesn’t blame his problems on Wall Street or having too much money too soon. Over 20 million Americans suffer from drug and alcohol addiction. This ex-buyside trader just happens to be one of them.
For the casual reader, the book is the story of a rich, young Wall Streeter who flew too close to the sun. For the trading pro, the value of the book is the peek he gets into the buyside-sellside relationship.
It is impossible to overstate the importance of that bond. It can mean the difference between getting the flow and not getting the flow. For all the talk about best execution-or perhaps because of it-the stock trade is a commodity service. Wining and dining is essential.
Mr. Whisper
“Galleon,” I say after one ring. the voice on the line is muffled, like they’re whispering something to me. again I say “Galleon,” and this time I can barely make it out: “Is Gary there?”
“No,” I say. “he’s out of the office.”
A few silent moments go by. I’m just about to hang up when I hear the whisperer’s voice again: “Is raj there?”
“Sorry,” I say. “he’s off the desk-can I help?” I can hear him breathing. his voice makes me imagine a trench coat and a phone booth. Very mysterious. Finally, mr. Whisper’s voice is a bit more intelligible. “Jefferies is going to upgrade amazon in six minutes,” it says. then I hear a click and just like that he’s gone.”
–Excerpt from “the Buyside” Page 71
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