Biggs, A Hedge Fund Tale of Reach and Grasp

Over the holidays I read Jane Smiley’s Private Life, the portrait of a rather ordinary, passive woman whose life is defined by the demands of her unstable, delusional husband—a life so private, one reviewer wrote, that it is no life at all. I then moved on to Barton Biggs’s A Hedge Fund Tale of Reach and Grasp … or what’s a Heaven for? (Wiley, 2011). (The title was taken from Robert Browning’s poem “Andrea del Sarto,” the musings of an artist who has had a disappointing career: “Ah, but a man’s reach should exceed his grasp, or what’s a heaven for?”) I capped off this holiday contrarian reading list by revisiting Dostoyevsky’s short novel of a young man’s descent into addiction, The Gambler. And when I decided enough was enough and that I needed a dose of the triumphant, even if it was triumph in the face of so much devastation, I turned to Gregory Zuckerman’s book about John Paulson’s coup, The Greatest Trade Ever.

I write all this to put my reading of Biggs’s book into context. It would undoubtedly have stood up much better had I not sandwiched it in between books by a Pulitzer Prize winning novelist and a literary giant. If, for instance, I had read it after Corporate Valuation for Portfolio Investment and followed it up with Reverse Mortgages and Linked Securities--both books, by the way, in my “to be reviewed” stack.

Barton Biggs, a major presence at Morgan Stanley for thirty years and cofounding and managing partner of a billion-dollar macro hedge fund, studied writing at Yale in the 1950s under Robert Penn Warren. He is a skilled writer. I especially enjoyed his book Hedge Hogging (Wiley, 2006). But he’s not a compelling novelist. This blog is not the appropriate venue for literary criticism, nor am I a literary critic. Suffice it to say that A Hedge Fund Tale of Reach and Grasp reads much better as a historically grounded morality tale than as a novel.

The protagonist, definitely no Everyman, is the offspring of a black mill foreman and a white waitress. He leaves rural Virginia to attend an academic wasteland of a college in Arizona on a football scholarship. After graduation, his dreams of playing in the NFL having long since been dashed, he pursues his new dream—being an analyst on Wall Street. Initially, he ends up in the back office. But he perseveres and soon enough catches a break (with the help of an asset management “godfather” and eventual father-in-law). From that point on, with Wall Street rewarding not only his seeming investing skills but also his prowess on the football field and the golf course, he moves into the heady hedge fund world. As co-manager of a quant portfolio with a value orientation, he puts up big numbers, makes big bucks, spends lavishly, and thinks the party will continue forever.

We know, of course, from its title that the tale won’t end well. We also know from recent history why it doesn’t end well.

Biggs carefully weaves together fact and fiction. Some facts are painfully familiar, but Biggs’s portrait of the inner workings of his fictional hedge fund illuminates a world that was—and to a large extent still is—all too real. For those of us on the outside this is useful information to store away. Here and there, always in passing, he also dispenses pieces of investing wisdom.

I must admit I cared more about the ideas than the people in A Hedge Fund Tale of Reach and Grasp. But then I suspect that even in real life I would care more about the ideas of hedge fund managers than I would about most of them as human beings. Perhaps that’s simply the nature of a world of reach and grasp.