The Blow-Up Artist

October 9  |  By Max  |  3 Comments

For anyone who has read the book Fooled by Randomness1, by Nassim Nicholas Taleb, the name Victor Niederhoffer may sound familiar (if you haven’t read the book, check out this article by Malcolm Gladwell). “The Blow-Up Artist”, a great article in The New Yorker, discusses Niederhoffer’s most recent financial troubles. Although Niederhoffer and Nassim Taleb are friends, after the events of the last two months I believe that Taleb has the last laugh.

Victor NiederhofferVictor Niederhoffer is a well-known hedge fund manager who got his start managing a trading firm in the 1980s. From 1982-1990, he partnered with George Soros and ran the Fixed Income and Forex divisions of Soros’ firm. Niederhoffer has published two books: The Education of a Speculator (1996) and Practical Speculation (2003). Since 2001 he has run Manchester Trading LLC, which manages three small funds with total assets under management of about $350 million at the end of June. Manchester’s main fund had returned 50% annualized through the end of 2006, earning it a prize for best performance by a Commodity Trading Adviser2.

Despite the level of respect for him in the trading world, Niederhoffer is most well known for the blow-up of his hedge fund in 1997. After the Asian financial crisis and a 7% one-day drop in the Dow, Niederhoffer Investments lost a majority of its capital and was forced to close down. These losses wiped out virtually all of the gains the fund achieved racking up 35% annualized returns since inception.

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  1. Fooled by Randomness, by Nassim Nicholas Taleb [ ^ ]
  2. Wikipedia: Victor Niederhoffer [ ^ ]
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