When Genius Failed Review


Or to quote the full title: When Genius Failed: The Rise and Fall of Long Term Capital Management by Roger Lowenstein.

Long Term Capital Management was one of the most ambitious hedge funds of it’s era. Run by academics rather than financiers, LTCM was the pinnacle of ivory tower intellectualism in the money management business. With countless PHDs, and even a pair of Nobel prize winners in economics- Long Term seemed fully equipped to beat the market, and return massive amounts of money for it’s investors.

A darling of Wall Street from day one, the firm raised a staggering $1.25 Billion from investors and banks around the world. Guided by the models developed by the powerful brains at the firm, they seemed unstoppable. The partners were on the path to dynastic wealth. With success assured, what could possibly go wrong? As far as the partners were concerned: nothing.

When Genius Failed is the premier cautionary tale of hubris and ego, of greed and confidence trumping caution during the rush for wealth. It’s an easy book to read, clearly written, and engaging. Everything is explained clearly and in detail, so even a cursory knowledge of financial markets should allow you to fully enjoy the story.

The book follows on from the same bond trading desks featured in Liar’s Poker, and the cast of (real) characters sometimes overlaps. So if you’ve ever wondered what can threaten the financial systems of the world (apart from sub-prime mortgages), and would like to get an insight into the high-flying world of bond arbitrage and hedge funds- then you should read When Genius Failed.

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