Mickey Mouse fund
Starting out
Holte Capital opened for business on 1 November 2002. We arrived at
the office drained from the drama of the previous week’s fund-raising. At
the 8am opening bell Brian sent me an email: ‘Houston, we have lift-off’,
which led to more self-deprecating banter about what a big bad hedge
fund we were, now that we had $3.5 million to throw around. ‘Corporate
Europe, be afraid Holte Capital is ready to make you dance’, ‘The evil
empire is ready to strike’, etc. Then it was back to work.
In the run-up to launch we had put together a ‘paper portfolio’ of secu-
rities we planned to invest in once we were in business. The only thing we
needed to do was to scale the size of each security for the total assets of the
fund. Had we launched with $50 million, a 1 per cent position would equal
a $500,000 investment and, assuming a $100 share price, that would mean
we had to buy 5,000 shares. As things were, we would only have to buy
Within a couple of hours on our first day we were ready to make our
first trade. The $50,000 buy order would be placed through Richard at
JP Morgan, a broker I had talked to since my first days at HBK. After the
usual banter about how honoured he would be to execute our first trade,
I explained that we would like to buy 620 shares in the Belgian company
GBL, working max. 20 per cent of volume at a max. price of 85 euros per
share. Massimo and Brian were listening in.
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-
raising go?’
‘It was pretty tough going to be honest. We launched with a little under
$5 million.’
‘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.

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