More Money Than God: Hedge Funds and the Making of a New Elite Kindle Edition

The depth of the author's research combined with interesting story telling crafted this book into a magic carpet ride into the world of hedge funds. I have an MBA with a focus in finance, yet honestly this book did more for me than any finance textbook - and it was very interesting!I have to reiterate just how impressive the research was for this book, I read all of the footnotes because a sheer amount of fascinating information is held in the footnotes. If I ever write a book - I want to approach it like this author.

The author begins to tell the history of the industry from the perspective of Alfred W. Jones, who coined the term "hedged fund" and started his own in the late 1940s.The book then describes different models and strategies employed by funds and key focuses of their managers, be it equities, distressed assets, currency speculation, different forms of arbitrage, et cetera.Some of the notable financial crises such as Black Monday in the 1980s, the LTCM debacle and the Dot-com bubble are told in a way that tries to expand on the role played by hedge funds. Interestingly, the author concludes that - generally - the industry should be only lightly regulated, even though he concedes that they often fragilize the economy in a way that harms the general public.

This was an overall very well-written and researched narrative of hedge funds through history. The author does a nice job of weaving the evolution of hedge fund strategy with the individual hedge fund managers. It gives a solid overview of the general strategies employed by hedge funds but by no means would serve as a guidebook in how to enact these strategies (in that regard, this book is more inspirational than cookbook). I deducted a star because unfortunately the author in conducting his laudable exhaustive research on hedge funds has become infatuated with them and overly extends moralistic conclusions to their existence and benefits to society. I was somewhat taken aback by his Conclusion in which he suggests our government should encourage the growth of hedge funds in spite of the blatant fraud he outlines throughout his book. Overall, I highly recommend this book to anyone interested in gaining substantial knowledge of this often discussed but little understood industry.

This is the magnum opus on the hedge fund industry. As other hedge fund related books seek to either vilify the industry or brazenly praise the uncanny good fortunes industry insiders - this book does neither - which I found refreshing and a strategic positioning of this work from "the rest."Sebastian Mallaby is currently the Paul Volcker Senior Fellow for International Economics at the Council on Foreign Relations. He's also a columnist at the WA Post and spent over a decade with The Economist responsible for international finance coverage - serving a bureau chief in Washington, Japan and southern Africa. He is the author of several noteworthy books on the political economy.This work is an epic contribution to the historical evolution of certain financial products and the global industry(s) spawned therefrom in primarily, the western world. Welcome to the hedge fund industry, including an amazing cast of characters, their thought processes, training, relationships and the outcome of their work - The Making of A New Elite - with More Money Than God.Admittedly, it is rare for me to dedicate myself to the reading of 400+ pages contained in any one volume, on any subject. Yet, the manner in which this book develops contains the unique qualities that inflame the desire within reader to come back for more. Incredibly well-written, researched, balanced and apolitical. This work is REQUIRED READING as an essential component in developing an understanding of global financial markets, risk assessment, risk management and the art of speculation.As I read the book, Mallaby makes some points that have been central themes of other authors (See The WSJ's Scott Patterson's - The QUANTS), regarding the miscues that fueled poor investment/risk management strategies. Listen to Mallaby to garner the essence of this observation as it relates to the "art of speculation" - "The art of speculation is to develop one insight that others have overlooked and then trade big on that small advantage." P.91 "After the 1971 debacle, Weymar set about rethinking his theory of the market. He had begun with an economist's faith in model building and data: Prices reflected the fundamental forces supply and demand, so if you could anticipate those things - you were your way to riches. But experience had taught him some humility. An exaggerated faith in data could turn out to be a curse, breeding the Sol of hubris that leads you into trading positions too big to be sustainable." "The real lesson of LTCM's failure was not that its approach to risk was too simple. It was that all attempts to be precise about risk are unavoidably brittle." P.231 (LTCM) Had misjudged the precision with which financial risk can be measured."p.245.The point is that an unrepentant belief in the quantitative modeling that provides that "one insight that others have overlooked and then trade big on it" can have enormous consequences in either capturing returns or accelerating a cataclysmic demise of the capital under management.How has that all worked out, in recent years? According to Mallaby, "Between 2000 and 2009, a total of about five thousand hedge funds went out of business, and not a single one required a taxpayer bailout."Ah yes, "bailouts" - what is Mallaby's take on this issue? Listen to the following: "Capitalism works only when institutions are forced to absorb the consequences of the risks that they take on. When banks can pocket the upside while spreading the cost of their failures, failure is almost certain." P.13. Mallaby is clearly not a proponent of "privatizing the gains and socializing the losses."What about our affection with history that drive financial and other forms of socio-economic modeling. Mallaby has some succinct insights: "Projections are based on historical prices, and history could be a false friend." P. 233. "In 1997, Merton and Scholes (LTCM) received the news that they had won the Nobel Prize for economics. The award was greeted as a vindication of the new finance: The inventors of the option-pricing model were being thanked for laying down a cornerstone of modern markets. By creating a formula to price risk, the winners had allowed it to be sliced, bundled, and traded' l thousand ways the fear of financial losses, which for centuries had acted as a brake on human endeavor, had been tamed by an equation." P.231. So, where does Mallaby leaves us at the end of this magnum opus? His analysis leads him to conclude "The worst thing about the crisis is that it is likely to be repeated." P. 377. However, to suggest that the hedge fund industry was the primary culprit in either the creation or magnitude of the Great Recession would be erroneous. Again, between 2000 and 2009, 5,000 hedge funds are to have ceased operations - none of which required a taxpayer bailout. Mallaby also takes a rather benign approach to the plausibility/practicality of regulating this industry ("The record suggests that financial regulation is genuinely difficult, and success cannot always be expected." P. 379).Yet, at the conclusion of this work, one quote from Mallaby continues to resonate with me: "It is the nonintuitive signals that often prove the most lucrative." p.302. However, the term "lucrative" as is as applicable to assessing risk and thereby avoiding potential losses, as it is to capturing returns on investment.Like I said, an epic contribution to the historical evolution of the hedge fund industry. An uncanny, incredibly thorough, balanced treatment - written in a way that is appropriate for both industry insiders, and the lay-person. A perfect volume for graduate coursework in finance -- one that focuses on human beings, as well as the quantitative financial services products they develop and deploy in the global markets today.

Over the course of time I have created quite a library of books on the financial industry as well as tomes written by the likes of Bair & Geithner. I've visited Bretton Woods and searched the maddening of crowds and manias. That said, very seldom do I feel the need to write a review, but in this case, I make an exception. Well researched, enlightening in it's depth, yet readable in its flow. Familiar with all the players covered here but gained depth of understanding of what they did and how they functioned. Not since The Seven Sins of WallStreet have I had a can't put it down read. This qualifies. If you have an interest in the story of Hedge Funds, do yourself a favor and give this a read.

I found this to be a very interesting read on the history of hedge funds, how they work and how they have evolved over time in times of crisis and innovation. It also gives you some background on the habits and personalities of the hedge fund magnates who made billions throughout the years. It's a fairly long book but I was never bored by it as the written style makes it very engaging. It also doesn't go into a great amount of detail on the technicalities which can be a blessing (it doesn't disrupt the narrative, this isn't an academic text after all) or a curse (if you're into the technical side), depending on how you look at it, but it is a very good insight into the industry and how hedge funds grew enough to influence global markets and even governments. Definitely recommended if you don't mind something a bit long and are into finance.

This is a wonderful, non-technical history of the hedge fund industry. Disclosure: I work in a large hedge fund, but in a non trading role. I purchased the book as I wanted to get a deeper insight into how these firms grew up and I am glad i have. As others have mentioned, it is a very long book but all of the information seems to be necessary. It takes you right from the first ever hedge fund up to the present. A great read for anyone who wants to work in the industry and needs a perspective on the history, or equally to someone who just has a casual interest in these firms which for the most part are quite secretive. 8.5/10.

Possibly goes in to more depth and covers more breadth than anything by Michael Lewis or Greg Zuckerman. Very fun (addictive) reading. Excellent style of writing providing the background, state of play and follow on to each of his scenarios. Covers things right from the beginning with Alfred Winslow Jones to the modern day age. Constantly plugs hedge funds but also provides some nice statistics towards the end to show that it isn't all golden.Essential reading for any hedge fundie

The story of the big cheeses in the growth of hedge funds. A lot of interesting tech talk about how a lot of people make a lot of loot from other peoples' money. Admire them or curse them for what they have done to global economics this is one you should read if you want to know where billionaires come from. It made it all a little bit easier to understand for me, and definitely a better read than JM Keynes!

This book gives a thorough history of the emergence and success of hedge funds, without assuming much prior knowledge of modern finance. While the material may be, to some, a little dry, it's a well-written book that doesn't feel like a slog. It's interesting to hear about the characters themselves running large funds, and the level of research that must have gone into writing this text is really impressive.