VOL. XCIV, NO. 247
BOOK BREAKDOWN
NO ADVICE
Monday, January 19, 2026
Intermediate · 2010
More Money Than God
by Sebastian Mallaby · Partly Dated
A narrative, strategy-by-strategy history of hedge funds that's most useful as a guide to incentives, leverage/liquidity risk, and why some investing edges exist (and then disappear).
Level
Intermediate
Strategies
5 types
Frameworks
6 frameworks
Rating
Target Audience
Ideal Reader
- Investors who want to understand hedge funds beyond the stereotypes (what they do, why it can work, how it blows up)
- Anyone allocating to managers (or evaluating a strategy) who needs a mental model of incentives, leverage, liquidity, and hidden risks
- People interested in financial history through the lens of trading strategies and risk-taking cultures
- Investors who want better 'risk smell' for crowded trades and fragile financing
May Not Suit
- Readers wanting a step-by-step 'how to pick stocks' book
- People looking for a formal quant text with reproducible backtests
- Anyone wanting a pure personal-finance book (budgeting, retirement mechanics)
Investor Fit
| Strategy | Macro/Global · Quantitative · Trading · Special Situations · Behavioral Finance |
| Time Horizon | Medium-term (1–5 years) · Long-term (5+ years) |
| Asset Focus | Multi-Asset · Equities · Fixed Income · Macro/FX · Options · Futures |
| Math Level | Basic Arithmetic |
| Prerequisites | Understands basics of stocks/bonds and why leverage matters · Comfortable with simple risk/return language (drawdowns, volatility) · Basic knowledge of derivatives helps but is not required |
Key Learnings
- 1Hedge funds are defined more by independence + incentive design than by hedging (many do not hedge in the plain-English sense)
- 2Incentives shape behavior: performance fees, high-water marks, and founder control can create focus but can also encourage risk-seeking if unchecked
- 3Leverage and liquidity mismatch are the classic blow-up recipe: good trades become fatal when funding dries up
- 4Alpha sources tend to be structural (constraints, complexity, specialization, speed, information) and capacity-constrained
- 5Strategy matters: global macro, long/short equity, event-driven, and quant/stat-arb fail in different ways
- 6Crowded trades are dangerous because exits are correlated (everyone needs the door at once)
- 7Risk management is usually about survival, not elegance: keep optionality, keep financing, avoid forced selling
- 8The industry history is a cycle of innovation -> imitation -> crowding -> lower returns -> new innovation
- 9Hedge funds can be stabilizing (arbitraging distortions) or destabilizing (fire sales under leverage); it depends on structure and regime
- 10Studying hedge fund episodes is a fast way to learn what 'hidden risk' looks like in real life
Frameworks (6)
Formulas (4)
Case Studies (6)
A.W. Jones / first hedge fund
Takeaway
Structure matters: long/short + incentives can change the risk/return profile more than stock-picking alone.
1992 ERM crisis / Soros vs Bank of England
Takeaway
Macro trades can be asymmetric when policy regimes are unstable, but sizing and exit planning are everything.
Long-Term Capital Management
Takeaway
Leverage + liquidity + correlation spikes can turn 'low-risk' relative value into a near-systemic event.
Renaissance Technologies
Takeaway
Data and execution can be a durable edge, but capacity and crowding limit how scalable alpha is.
Amaranth Advisors
Takeaway
Concentration in derivatives + liquidity assumptions can destroy a fund fast even if the thesis is not crazy.
Subprime mortgage crisis trade
Takeaway
Optionality can create massive asymmetry, but patience, carry costs, and timing still matter.
Mental Models
- —Incentives-as-engine (fees + governance define behavior)
- —Leverage as an amplifier (and a fragility multiplier)
- —Liquidity is a risk factor (not a detail)
- —Funding risk (prime broker / margin / haircuts) as a first-class risk
- —Crowding exits
- —Capacity limits: a great strategy can be a bad business once too much money copies it
- —Survivorship bias: stories are dominated by winners; average results can be much worse
- —Small-enough-to-fail vs too-big-to-fail: structure determines systemic risk
Key Terms
No glossary terms documented for this book.
Limitations & Caveats
Keep in mind
- •Not a how-to-run-money manual; it is history + explanation, so you will need other books for implementation detail
- •Winners get more page-time than losers (built-in survivorship story bias)
- •Some strategies are necessarily simplified (implementation is where edge and risk live)
- •Hedge fund structures, regulation, and instruments evolve; some details will age
Related Tools
Reading Guide
Priority Reading
- Origins and early structure (what hedge funds really are)
- LTCM and other leverage/liquidity blow-ups (risk anatomy)
- Quant/stat-arb era (what a real edge can look like)
- Crisis-era chapters (structure vs bailout dependence)
Optional Sections
- —Deep biography passages if you only want strategy and risk takeaways
Ratings
Concept Tags
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