Go 'Inside the House of Money'

Contrasted with the top-down, active trading and disciplined risk management focus of most global macro funds, managers focused on bottom-up, longer-term valuation approaches tended to be among those most disappointed, as they decried markets, saying they are "irrational" and "oversold," creating a "perfect storm."

The book's conclusion is simply the famous and now often-cited quote by Keynes: "In the long run, we're all dead." Some markets might in fact be cheap at current levels. But can you stay solvent long enough to capitalize on such "value?" As many managers in the book belabored well before it was fashionable to do so, this game is all about liquidity, liquidity, liquidity.

Inside the House of Money was born from a simple question: What is macro? Where other hedge fund strategies are relatively straightforward (buying or selling stocks, for example), global macro managers can bet on any instrument, in any market, anywhere in the world. As one interviewee describes it in the book, global macro is "the willingness to opportunistically look at every idea that comes along, from micro situations to country-specific situations, across every asset category and every country in the world. It's the combination of a broad top-down country analysis with a bottom-up micro analysis of companies." The lack of understanding by the investment community of how global macro managers build their portfolios, construct their trades and decide on what bets to make is what prompted the effort to produce the book.

A brief history of hedge funds at the start of the book explains how in the beginning, all hedge funds were global macro. But then, hedge funds gradually attracted institutional capital, forcing them to become more specialized in order to stand out amongst the increasingly competitive marketing landscape. And much of this specialization translated into illiquidity in 2008.