The Stack

Tales of a Hedge Fund Burnout


Diary of a Very Bad Year:
Confessions of an Anonymous Hedge Fund Manager
By Anonymous Hedge Fund Manager and Keith Gessen
Harper Perennial; 272 pp, $14.99

Let's say you've resolved to free yourself from the tyranny of Stieg Larsson by attempting something more productive with your beach reading this summer. Like, what the heck, dipping your toe into that vast ocean of financial crisis literature. So at the next barbecue you can be the guy amazing and delighting everyone with a witty elucidation of how the commercial paper market nearly seized up.

But which book? You've read the Vanity Fair excerpt of The Big Short, and Too Big To Fail, not yet in paperback, is, alas, too big to lug to the beach. Less taxing and more portable is Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager. It's like the Cliff Notes of the financial crisis, which is a useful thing to have.

Be forewarned, however, that the title is misleading in at least three ways. First, this book is not a diary; it's a series of interviews conducted as the crisis unfolded by novelist Keith Gessen, who is also the editor of the literary magazine n+1, of an acquaintance who has worked at a hedge fund for a decade.

Second, the year that this anonymous hedge fund manager, referred to as HFM in the book, chronicles does not turn out to be very bad for him at all. In 2008, while millions of Americans were losing their jobs, homes, and life savings, all he lost was some peace of mind. His fund—which he describes in not-great detail as a market-neutral, long-short operation—suffered only minor financial losses.

Third, there's nothing remotely confessional in this book. Our hero reveals no bad deeds, or even much in the way of bad thoughts, and he accepts blame for absolutely nothing. Anonymous was just a dude doing his job, worried about the precarious state of the world financial system, yes, but not in any way responsible for it.

So let's call the book "Conversations about a Very Bad Year for Other People" and give it props as perfectly serviceable beach reading—and sometimes more than that. It does something few of the books written about the crisis have accomplished: It delivers an insider perspective on the events in real time, rather than dwelling on conclusions reached after the fact.

This hedge fund manager was not a brilliant seer who predicted the housing bubble would burst and positioned himself to bathe in the profits. Nor was he an imbecile who piled into the other side of John Paulson's trades, then later claimed to be victimized. He was, like most intelligent life on Wall Street, somewhere in between, cognizant of the risks inherent in the rampant securitization of debt but unsure of how exactly to exploit it while protecting his investors.

Initially he believed, as did many, that subprime excesses would not explode into a larger economic trauma. But he became increasingly distressed by how the real-estate boom distorted the American economy, sucking energy and talent into the superfluous production of houses and the financial superstructure that sat atop them.

Although skeptical of governmental intrusion into the markets, Anonymous supported many of the bailouts, including AIG' (AIG)s, as necessary emergency measures. He recognized the need for an aggressive stimulus package, though he worried that without proper vigilance it would result in permanent governmental bloat. These views are fairly conventional within the business community but are muted in many of the journalistic and academic accounts of the crisis. Here they are expressed forcefully, clearly, and persuasively.

If Diary of a Very Bad Year is appealing for the clarity of its big-picture elements, it is less so in its little pictures. Anonymous tries hard to sound like a regular fella but occasionally comes across as smug and self-absorbed. At one point, while describing his own material needs, he says that "personally, I have enough stuff—it's painful for me when I get a gift." Then, at the end of the book, we find out that this man who wants for nothing has decided to retire to Austin—in part because he's "getting killed on New York City taxes."

What now? After stumbling into a fabulously lucrative line of work that exists primarily in New York City, he'd prefer his wealth not support the schools, parks, hospitals, housing, and transit systems that the rest of the city relies on. Such casual disregard for civic responsibility makes us want to chuck this little book into the surf and go for a swim.

Lindgren is an Executive Editor for Bloomberg Businessweek.

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