Barton Biggs, Wall Street’s top-ranked investment strategist
and the head of Morgan Stanley’s research and asset management businesses,
abandoned Wall Street in 2003 to stake his claim in the world of hedge funds.
Now Biggs is baring the secret worries of those who live on financial steroids,
along with a slew of gossip and a few tall tales in his new memoir, Hedgehogging (Wiley). Traxis, the moniker
of the billion-dollar-plus hedge fund he launched with Cyril Moulle-Berteaux and
Madhav Dhar, is, he says, "a word we manufactured that means nothing," a
refreshingly candid revelation for a memoirist these days. Biggs peered beneath
the facades of finance in a recent interview with Worth features editor Jan Alexander.  The Wall Street memoir is becoming a literary genre in its own
right, and there are many of us who cannot resist a tale of money, power and
hubris. One thing worries me, however. As you explain in the book, the fund of
funds managers are always watching you: "They don’t even like their guys to get
too interested in charities. They don’t like you to get distracted from fund
performance." Have any fund of funds managers grilled you about the time you
spent writing a book?
No, but it may happen. In my
case I would argue that one of the ways I think is by writing. Some people think
by talking, some by looking out the window with a glass of Chardonnay in their
hands. It’s a great test to write down your impressions of things and events,
and go back a year later to read what you said. That could be unnerving when you are in the business of profiting
from your own "Eureka!" moments. There are a lot of
misconceptions about the hedge fund business as being, you know, the yellow
brick road to wealth. It is also a street of tears for a lot of people who do
not make it. A thousand new hedge funds start out with great hopes every year,
and a thousand go out of business every year. Yet so much talent is going there. You opine in the book that
a wife is not elated to tell another wife that her husband is a mere broker. The
best and brightest migrate to hedge funds, leaving even very affluent
individuals with short shrift from wealth managers. Unsophisticated wealthy people,
at least, definitely need help with their wealth management. The problem is
there aren’t a lot of good people providing help out there. I have a friend who
has a substantial amount of wealth and concentrates on the hedge funds that are
longtime winners. That works for him, but he has tremendous access. For a person
with $20 million to $50 million, it’s a different story. There’s nothing wrong
with index funds as a place to invest. And if I had only $4 million to invest,
I’d put it all into index funds. At that level you don’t have the purchasing
power to get really good advice. The crowd is always wrong during market extremes, which makes you
skeptical of those who foresee a real estate bust. Commercial real estate,
definitely, is still a valid investment. Properties in the U.S. are getting
pretty fully priced, but markets in Japan, elsewhere in Asia and Germany are
still very depressed–and very attractive. These are parts of the commercial real
estate market that wealthy individuals should be involved in, but not by
themselves because the entry costs require size. This is one of those times when
REITs come in.
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