Even the calmest hedge-fund manager can have “a terrible, horrible, no good, very bad day,” to quote a beloved children’s book.
Ask Lars Kroijer, a Harvard-educated Dane who logged onto Bloomberg one hot August morning in 2007 only to see his investment in a European shipbuilder sink like a one-ton anchor. His fund, Holte Capital Ltd. in London, lost about $10 million that day -- enough to rattle investors even though it was a blip compared with blowouts such as Amaranth Advisors LLC.
“It felt like the world was ending,” says Kroijer, 39, recalling how Aker Yards ASA plummeted after the company cut its profit forecast that day. “You feel as if the world has just told you, ‘You don’t know what the hell you’re doing.’”
That marked the beginning of the end for Holte, as he explains in “Money Mavericks,” a memoir tracing the groveling rise and sudden demise of one of the 5,000 or so funds that closed between 2000 and 2009.
After the Aker Yards debacle, Holte had a bad run. By October, its year-to-date return had shrunk to 12 percent. One big investor pulled out, and Kroijer, contending with a stampede of others who wanted out, decided to return all their capital, he says. By Feb. 1, 2008, he writes, “We were done.” He went for a walk in the rain.
I caught up with Kroijer over a plate of chicken curry at the Havelock Tavern, a gastropub with battered wood floors and mismatched chairs on a West Kensington street in London where cherry blossoms swirled off the trees. We continued our talk on the phone, discussing why he now invests in index funds and is in training for a triathlon in Copenhagen this August.
“I just ran, believe it or not, back from Tower Bridge,” he said from his home in Richmond the day before the royal wedding of Prince William and Kate Middleton. “I ran past Buckingham Palace, and it’s like an alternative universe.”
With his tousled brown hair, open-collared shirts and American-inflected English, Kroijer doesn’t fit the usual hedgehog stereotypes. He’s not the kind of guy who smashes computer screens and buys $8,000 bottles of Romanee-Conti. He sounds more like a tired family man who needs a dose of Echinacea. He swims in a local public pool, where Band-Aids litter the bottom, and he’s coughing from some bug.
“It’s all this training,” he says, shrugging it off. “It says in my program that it makes you catch small colds all the time.”
Blur of Calls
The morning Aker Yards dropped, Kroijer hurried to gather information about what went wrong. The Oslo-based company had mentioned unforeseen cost overruns, he recalls, and the day became a blur of phone calls and a lunch with Aker managers. Then things got worse.
“In the middle of this, I get a call from the nursery, saying ‘You’ve got to take your daughter to the eye hospital. She has a piece of metal stuck in her eye.’”
One of his twins, Anna, almost three, had something scratching her eyeball. At the hospital, Kroijer and his wife took her straight into an operating room, where a Norwegian number rang his cell phone.
“It’s obviously Aker Yards and it’s obviously important, so I take the call,” he says. “That was probably the moment I came closest to getting divorced. I got this look from my wife - - this look of ‘You are the scum of the earth.’”
He kept the call brief, and the doctor -- after giving Kroijer his own dirty look -- plucked out the metal and put Anna on antibiotics.
“She healed in about three weeks,” says Kroijer, putting the drama in perspective.
Though it was the worst day Holte had ever had, the loss amounted to 3 percent of the fund -- in line with what he told investors might occur, he says.
“When I take a step back now, I can see that I’m probably slightly guilty of overdramatizing in the book,” says Kroijer. “But living it didn’t feel that way at all.
“Sometimes, I talk to friends who say, ‘Dude, I lost 52 percent one year, and you write a chapter about losing 3?’”
Kroijer says he hasn’t had a single day when he missed running Holte, no matter how much he enjoyed the analysis and camaraderie. He no longer manages money, even his own.
“I take the view that either you do it full on or you shouldn’t do it,” he says. “So for now I’m putting my money in index funds and the hedge funds of a couple of friends.”
He serves on boards of companies including Kit Digital Inc., which specializes in video software and services. He also gives talks about his experiences at Holte.
“Many people have a hedge-fund manager in their tummy,” he says. “They want to hear what it’s like to try to raise the money and what’s it like to be rejected for the 300th time.”
So how does that feel?
“It’s pretty humbling,” he says. “Not even my years of chasing girls in high school have anything on that.”
“Money Mavericks: Confessions of a Hedge Fund Manager” is from Financial Times Prentice Hall (210 pages, 20 pounds).
(James Pressley is a book critic for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)