“More Money Than God” by Sebastian Mallaby is an insightful exploration of the world of hedge funds and the rise of the fiscal titans of the modern era. This comprehensive look at the history of hedge funds shows how they have evolved and affected the economic landscape. Through in-depth interviews and research, Mallaby delves into the history and motivations of these hedge fund trendsetters, and their strategies and successes.
The book begins with a discussion of the 17th century figure, John Law, who pioneered the use of derivatives in Europe. He is seen as the father of the hedge fund movement, which initially consisted of industry insiders investing for themselves with their own capital. As the hedge fund industry grew, new strategies were adopted and tech advancements improved the transparency of these investments.
Mallaby then examines the boom in the hedge fund industry in the mid-1990s when pension funds, university endowments, and wealthy individuals began investing. He explains that the market itself was largely opaque and that the new investors, with no background in the industry, took a leap of faith and put their money in untested portfolios. This was in contrast to the old way of investing, which relied on the use of diversified baskets of stocks and bonds. This allowed people to gain a greater level of risk diversification.
Mallaby then looks at the personalities that came to dominate the industry, many of them entrepreneurs or former financiers who had made a fortune on Wall Street. These included George Soros and the infamous “Wolf of Wall Street”, Jordan Belfort. He goes on to profile some of the most successful hedge fund managers, and how they created their fortunes. Soros, for instance, combined an eclectic mix of high-risk investments and unorthodox trading strategies to create one of the most successful hedge funds in history. The book also features interviews with other high profile figures from the industry, including Edward Lampert, the former CEO of Sears, and Peter Thiel, the founder of PayPal.
Mallaby also looks into the events that led to the financial crisis in 2007-2008 and how hedge funds, despite some of their own missteps, ultimately responded with agility and fortitude. He explains how those who stayed disciplined amid the frenzy were able to avoid the collapse of their markets and come out ahead. He also sheds light on the strategies employed by the most successful hedge fund managers during the crisis.
Finally, the book examines what the future of hedge funds might be in a post-financial crisis world. He argues that the industry is now more mature, much less opaque and with a greater emphasis on transparency and risk management. He argues that the future of hedge funds lies with those who embrace new technology and embrace strategies that are able to sense and respond to changing economic climates.
As a whole, “More Money Than God” is an intriguing peephole into a fascinating industry and shines a light on the personalities who have revolutionized hedge fund investing. It is a valuable resource to anyone interested in understanding the history of the hedge fund industry and the innovative strategies that make it successful.
