Just finished reading a fascinating tale of greed and corruption written by an Indian - Canadian - American author. Her book is titled 'Black Edge'. Author is Sheelah Kolhatkar.
It is largely a write up of a once prominent American hedge fund manager who could earn best in class rates of return for his investors. Hedge to the lay person is a bet. Bet that is counter to the going thesis for returns on a particular asset that can either increase or decrease in value.
Originally the hedge funds were just that where bets were placed on both long and short side for certain assets in conjunction such that it would make money to its investors regardless of the price movement.
Today the hedge fund industry is much more complex and does not necessarily follow the above logic. It is merely a limited partnership run by very smart people that takes other people's money and invests in high risk and preferably, high reward trades. The founders are typically the money managers and their business is all about 'running the money'.
'Black edge' is a term specifically used to define non-public and material information about a company that if available to a money manager can result in outlandish returns for their investors. That access is the trader's 'edge'.
Such information can be gleaned if a manger is able to get an inside track on the goings on of a business before that information becomes public knowledge. The book explores the true stories of a number of such hedge fund managers who used the unfair advantage and exploited the system for personal gain.
The FBI, NY Attorneys office and the SEC all play a central role in the narrative and highlight various cases of people going rogue and how in some cases they paid their dues.
What is exceptional in the story is the one name that is able to escape jail time as a result of the criminal charges brought against his firm. That person is Steve Cohen. He founded his name sake SAC Capital which at one point was one of the largest hedge funds in America. A manager in one of the subsidiary companies obtained information through illegal means and used it to profit. That is the crux of this book.
It is an intriguing read and moves like an action movie except the action is all in the activities conducted by some bad actors in obtaining and using (what should be confidential) business information to profit.
It is largely a write up of a once prominent American hedge fund manager who could earn best in class rates of return for his investors. Hedge to the lay person is a bet. Bet that is counter to the going thesis for returns on a particular asset that can either increase or decrease in value.
Originally the hedge funds were just that where bets were placed on both long and short side for certain assets in conjunction such that it would make money to its investors regardless of the price movement.
Today the hedge fund industry is much more complex and does not necessarily follow the above logic. It is merely a limited partnership run by very smart people that takes other people's money and invests in high risk and preferably, high reward trades. The founders are typically the money managers and their business is all about 'running the money'.
'Black edge' is a term specifically used to define non-public and material information about a company that if available to a money manager can result in outlandish returns for their investors. That access is the trader's 'edge'.
Such information can be gleaned if a manger is able to get an inside track on the goings on of a business before that information becomes public knowledge. The book explores the true stories of a number of such hedge fund managers who used the unfair advantage and exploited the system for personal gain.
The FBI, NY Attorneys office and the SEC all play a central role in the narrative and highlight various cases of people going rogue and how in some cases they paid their dues.
What is exceptional in the story is the one name that is able to escape jail time as a result of the criminal charges brought against his firm. That person is Steve Cohen. He founded his name sake SAC Capital which at one point was one of the largest hedge funds in America. A manager in one of the subsidiary companies obtained information through illegal means and used it to profit. That is the crux of this book.
It is an intriguing read and moves like an action movie except the action is all in the activities conducted by some bad actors in obtaining and using (what should be confidential) business information to profit.
Comments
Post a Comment