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Vanity Fair piece Details Seven Step Process for Wading Into The Hedge Fund Market — Or Does It?

Wednesday, 29 Sep 2010 | 8:57 AM ET

That there is no clear indication of whether Vanity Fair's piece is intended strictly as comedy may give us some insight into the current state of affairs in hedge fund land.

Stack of U.S. hundred-dollar bills
Stack of U.S. hundred-dollar bills

The setup is this: VF's article lays out a skeleton process for starting a hedge fund. Then a writer doing shtick is paired with an "Actual big-shot hedge-fund manager," who dispenses what he may or may not believe to be bona fide advice. Wacky hijinx ensue.

For example, the following:

Advice: "Hire a good P.R. person!"

VF's take: "It's a long road to your first billion. But when you get there, watch your back!" Actual big-shot hedge-fund manager's tip: "When you have over a billion dollars at least, that's when people start shooting at you.

There's so much Schadenfreude out there that you'll need Schadenfreude-defense. But remember that's way down the line."

Yep, there's not much daylight between them.

And this: "The nasty world of seed investing is one step up from human trafficking. They try to own a piece of you: 'I'll give you $25 million, but I own 40 percent of your company.' It's similar to the Œpimp-and-ho' model: they put the money into you, and you've gotta go work the street." (That gem is from the actual hedge fund manager — in case you were wondering.)

So what's the meta-joke here? Perhaps it's that the Volcker rule and other fin reg requirements will trigger an exodus of the best and brightest from large banks to hedge funds as increasingly stringent rules are phase in.

And then what happens? Does the hedge fund market become so overextended that seed capital begins to dry up? Will dumb money flood into trendy new markets causing a new asset bubble to form and then terrorize the public? No one can say for sure — since, like the best of Monty Python, the punch line remains obscure.

But perhaps we should take note of this moment , as the unwashed masses failed to when a simple shoe shine boy asked Joe Kennedy — or J.D. Rockefeller, depending on who's spinning the yarn — for a stock tip.




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