Book Review – More Money than God: Hedge Funds and the Making of a New Elite (2010) by Sebastian Mallaby


1)      What are you currently reading and why?

I’m reading More Money than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby. It is one of the most comprehensive books on the history of hedge funds. It is very well written and reads like a novel rather than a textbook. The stories are well-researched and highly relevant against a backdrop of the current financial landscape. I would recommend this book for finance professionals and laymen alike. It is definitely one of the best (if not the best) book on hedge funds out there. This is a non-technical book which covers the rise and fall of the biggest names in the industry from the very first modern hedge fund – AW Jones, to current titans like Paulson & Co and Citadel.

It looks into the history and success of hedge funds. It also delves into hedge fund catastrophes, the ‘highs and lows’ of the industry – from the first long/short fund in 1949 to the recent financial crisis. The esoteric field of hedge funds has always piqued my interest. This book provides a detailed account on various hedge fund legends like George Soros and Stan Druckenmiller as well as Paul Tudor Jones, the Commodities Corporation, Citadel, and Jim Simons amongst others. The book takes the reader through all the major economic events from a hedge fund’s perspective and the excellent narrative helps readers to relive those events and get inside the mind of a fund manager.

2)      What strikes you most about the book?

Hedge funds have been portrayed as secretive freewheeling money managers, corporate raiders, or worse – economic hit men. Nothing could be further from the truth. The cemetery of hedge funds are filled with many managers whose funds imploded that we never hear about.

I also share the author’s view that the hedge fund industry should remain ‘unregulated’. Hedge funds have consistently outperformed every asset class due to their nimble ability. Unlike banking institutions, hedge fund failures are borne by the fund partners and their private investors. Until now, no public money has ever been used to bail out a failed hedge fund. The same cannot be said about banks. Of course, there are notable hedge fund scares such as Long Term Capital Management and Amaranth. The bankruptcy of Bear Stearns and Lehman Brothers are also well documented in this book.

Mallaby debunks the myth that hedge funds pose a systemic risk to the financial markets and that they were partly responsible for the 2007-2009 financial crash. The author paints hedge funds as the pinnacle of capitalism. They shift vast amount of cash between countries and companies helping to grease the giant economic machine by allocating capital more efficiently. Hedge funds will tear a firm down if it makes money and build it back up if it makes more. They punish inefficient firms though short-selling and reward well-managed ones with capital. Capitalism at its very best.

After reading the book, one may be keen to invest in hedge funds. The return on investment is phenomenal. All in all, if you are curious about hedge funds, how they make money, why the successful ones are so profitable and how their trading strategies work, the book comes highly recommended. For myself, I am in awe at how human ingenuity in shuffling bits around electronically with little or no productive effort can have such monumental effects on the global financial markets. The book was nominated for the Financial Times and Goldman Sachs Business Book of the Year Award and was also one of Wall Street Journal’s 10-Best Books of 2010.

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~ by David Wong on August 18, 2011.

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