Sometimes, here at WhoWhatWhy, we find it useful to see what was said, back in the good old days, about the institutions that later became so reviled. Along these lines, we refer you to an April 2007 New York Magazine cover package, “Behind the Hedge”—a primer on hedge funds and the (almost all) men who inhabit that world. It’s an examination, chortle, cautionary word, and celebration of the glories of excess, all in one.
A couple of excerpts:
In a sign of hedge funds’ growing clout in other spheres, in late January, Senator Chuck Schumer called twenty or so of the top hedge-fund managers and invited them to the Upper East Side Italian restaurant Bottega del Vino. It was supposed to be a friendly chat—Schumer’s message was, you talk to us about what’s going on, and nobody has to worry about too much interference from regulators. It’s chilling to think of all that secret power assembled in one place, like the Cosa Nostra Apalachin summit in 1957. . . . The combined assets under management of those attending had to have been $200 billion. [Emphasis added.]
Um, and this….
A recent report by the European firm Dresdner Kleinwort points out that if 4 percent of assets under management go to fees, and another 4 to 5 percent is spent on trading commissions and interest, hedge funds would need to pull in 20 percent annually to justify their costs. That forces them to take ever greater risks. [Emphasis added.]
Everybody needs a place to live . . .
Anyone who’s lived in New York longer than five minutes understands what hedge-funders have done to the real-estate market. Until five years ago, nobody would’ve dreamed of paying $20 million for any apartment. Now, it happens so often nobody even talks about it. There’s also the downtown migration: A classic six on Park Avenue is a nice place for Grandma, maybe, but it’s a lousy place to hang art. For that, you need 5,000 square feet in Tribeca. . . . Along with Russian oligarchs and Chinese billionaires, “hedge-fund guys” are cited whenever people try to explain the current art-market madness.
The hedge-fund people are buying 60-foot, 70-foot boats. For a 60-footer, $2.3 million. Some even put an office inside their boat, TVs switched onto Bloomberg, all Ethernet connected, satellite TV, GPS radars, all of it. And they like Jacuzzis a lot. I had one guy pick me up in his baby Boeing 707 and fly me over to the factory in England to see his boat. There was this one gentleman, when he put his feet up on the table, his toes were just in the way of the TV, so he asked us to reposition the TV. They really expect the best.”
—John Novak, manager, Sunseeker
And, um, finally, this….
Don’t worry too much, though.
While the Dresdner analysts termed the likelihood of it inevitable, they concede that it’s not exactly predictable. Which means that it will happen, but it could be tomorrow or it could be in 100 years, when all of Manhattan will be underwater and your apartment won’t be worth anything anyway.