64 B ec omi ng th e real de al
‘Hang on,’ said Richard, before asking, after a pause: ‘You do know this
is only about a 50 grand order, right?’
‘Yeah, I know. Starting small,’ I said.
There was another pause. Then Richard asked: ‘Lars – how did fund-
‘It was pretty tough going to be honest. We launched with a little under
‘That is tough,’ he said, ‘but I gotta tell you that if this is going to be
your typical order size, you might want to take your trades elsewhere. I
don’t mind helping you at all, but if the higher-ups see these sizes consist-
ently from Holte they might ask me to cut you off from research and stuff.’
‘That’s cool,’ I said. ‘Thanks for letting me know.’ But he had certainly
taken the wind out of my sails.
Although we were a lot smaller than we had hoped, it felt great to be
in business. Lots of people have endless cocktail-party conversations about
how they plan to start a hedge fund, but we had actually done it. This was
our baby and we were going to try our hardest to make it work. After
months of talking about what we planned to do once the fund launched,
we were now doing it – analysing companies and industries and coming up
with clever hedging strategies that could
express the nugget of value we thought
we had found in each trade. This was what
running a hedge fund was meant to be
like, and it felt great. Of course, it would
have felt better with more money in the
bank, but once we were fully absorbed in
the analysis, our dire financial state seemed to matter less. The first week
was spent putting together the portfolio we had planned before launch.
After that first reality check with Richard we began to do a lot of the trades
using the cheap and electronic direct market-access platforms that Morgan
Stanley had provided us with. That way, we avoided humiliating reminders
from brokers about how small our orders were.
But our first few days were rough. By the end of the first week we
had lost money every single day. By the end of our second week we had
lost money in nine out of our first ten trading days. I left the office that
Friday evening in a state of puzzled dismay. What was going on? Was there
something systematic in the portfolio that meant that we were somehow
This was what running a
hedge fund was meant to
be like, and it felt great.