Sectors and Styles: A New Approach to Outperforming the Market Book

Funny, wise, and scary.

Hedgehogging is effectively a series of fictionalised anecdotal recollections anecdotes strung together into several topical essays. The material is well-organised and non-repetitive, the writing is light and witty, yet its contents thoughtful and well worth going over again. Biggs was there at the start -- he worked as an analyst for Alfred Winslow Jones -- then spent years at Morgan Stanley and headed its investment management division, and is still in the game as a partner at his own hedge fund Traxis. So these thoughts really represent a lifetime in the industry. Yet what I enjoyed is that its not just about how to manage money -- it's about people in the industry, sights along the way, the emotions experienced; it's almost like a nice witty tour guide you'd read before making your first trip to wherever.

On first read, I liked these points he made, in no particular order:

1). *Now* (emphasis Biggs) is always the hardest time to invest.

2). He claims to be agnostic over value vs growth, though biased to value -- the only time growth smashed value in terms of outperformance was 98-99.

3). A great chapter of caricatures of managers -- my favourite is of this successful fund manager (hedgehogs, he calls them) who's always extremely calm, rational and genial; they're having a golf game and the guy is having a bad day, hits two balls into the water -- and without warning, suddenly breaks into a completely silent rage, bashing his club on the ground, whacking it against a tree, and then tossing it far into the water. The others move on, embarassedly, and the guy joins them the next round, polite as ever, as though nothing had happened. That evening, instead of sitting around to chat, the guy goes back out to practise his drives -- Biggs wanders out to see how he's doing, and from afar, sees him hit badly, and again go through the same routine of controlled, intense rage. Biggs decides to go back in.

4). The recurrent, and colorfully elaborated, theme of how hard it is to raise money for a new fund, and how harsh investors can and will be regardless of your track record.

5). Thoughtful advice on how to manage family money, and hedge fund selection, with reference to David Swensen. The advice to look for investors -- not businessmen -- and once you have them, to stick with them.

6). If you can get 10% steady returns on your money, on average, growing capital in bull market and preserving it in bears -- that is already damned good.

7). A variety of different investment styles, in different asset classes, are described along the way.

8). A lot of clever little quotes from other writers of history, biography and poetry. The half-page conclusion, for example: "Men are wise not in proportion to their experience, but to their capacity for experience".

9). After a work week of reading research reports, almost invariably trudgingly written, one needs, on the weekend, something... else. Something that reminds one of light and life. Everyone has their own poison here, I've noticed -- blues music, history, techie stuff, Command & Conquer, sport...

10). The breadth of mind required of a good investor (biased toward his value-oriented, fundamentals driven style, I admit), again from the conclusion -- investing is much more an art than a science; intelligence, experience, diligence, a knowledge of history, an open mind, and an obsessive nature... plus intuition, imagination, flexibility, and a touch of the seeing eye...