Book Review: Hedgehogging by Barton Biggs

In a previous working life Barton Biggs was the Head Global Strategist for Morgan Stanley. As such, he wrote articles about the course of markets and economies on a regular basis. Such was his fame, prestige and influence that he was quoted every month without fail by major newspapers and financial columns worldwide.

But Biggs - it seemed - wanted a return to actual investment management and founded his own hedge fund, Traxis Partners. Needless to say, this makes him a very well known hedge fund manager in a world where his peers generally seek a low profile.

This low-profile, in case you are unaware, is because of the huge wealth at stake. Hedge fund managers and entrepreneurs count and compare their wealth in units it seems. One 'unit' is US$100 million, obviously...

This book, Hedgehogging, is a description of many things investment and hedge fund related. His writing style has always been clear and he has a gift of making many technical financial topics accessible to the 'rest of us' that don't speak 'quant' or macroeconomics fluently.

Therefore, he is able to explain much of the workings of the hedge fund world in a way that we can all understand. Subjects such as asset allocation - which are a mystery to the rest of us, are looked at in enough depth to satisfy most industry outsiders. However, much of the book is descriptive of the people and methods of this secretive group.

He explains the mindset of many traders, the factors that can set a fund apart as a success or failure, the workings of a fund and the sales methods of financial groups. Almost as interesting, he describes the competitive spirit between fund managers and the way that this impacts their performance.

Other subjects such as alpha, asset allocation, high-water marks, forestry and private jets also receive attention...

The book also contains a final chapter dedicated to John Maynard Keynes - who could be described as the first hedge fund manager.

Bearing in mind the lack of clarity sought by the hedge fund industry about itself, and the massive impact that 'hot money' has on markets around the world, most investors should need to know more about this part of the investment world. Reading this book will not turn you into a hedge fund manager, but it will explain more about their work and modus operandi so that their major financial moves are less of a surprise.

In addition, this is simply a well-written, factual and in-depth account of an industry. It should therefore, be interesting simply for that.

I would recommend this as a way to learn a broader understanding of financial markets, products and managers.

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