The Fear Index

last,’ he said, ‘Dr Alexander Hoffmann, ladies and gentlemen, the president of Hoffmann Investment Technologies. As you can see, his brain’s so big we’ve had to let out his head to give it some breathing space. Sorry, Alex, only joking. I’m afraid he took a bit of a knock, hence the stitches, but he’s fine now, aren’t you?’
    They all stared. Those nearest to Hoffmann twisted in their seats to look up at him. But Hoffmann, hot with embarrassment, avoided eye contact. He took his position next to Quarry, folded his hands on the table in front of him, and stared fixedly at his interlaced fingers. He felt Quarry’s hand grasp his shoulder, the weight increasing as the Englishman rose to his feet.
    ‘Right then, we can at last get started. So – welcome, friends, to Geneva. It’s almost eight years since Alex and I set up shop together, using his intelligence and my looks, to create a very special kind of investment fund, based exclusively on algorithmic trading. We started with just over a hundred million dollars in assets under management, a big chunk of it courtesy of my old friend over there, Bill Easterbrook, of AmCor – welcome, Bill. We made a profit that first year, and we’ve gone on making a profit every year, which is why we are now one hundred times larger than when we started, with AUM of ten billion dollars.
    ‘I’m not going to boast about our track record. I hope I don’t need to. You all get the quarterly statements and you know what we’ve achieved together. I’ll just give you one statistic. On the ninth of October 2007, the Dow Jones Industrial Average closed at 14,164. Last night – I checked it before I left my office – the Dow closed at 10,866. That represents a loss over more than two and a half years of almost one quarter. Imagine that! All those poor saps with their retirement plans and their tracker bonds have lost about twenty-five per cent of their investment. But you , by placing your trust in us over the same period, have seen your net asset value increase by eighty-three per cent. Ladies and gentlemen, I think you’ll agree that bringing your money to us was a pretty smart thing to have done.’
    For the first time Hoffmann risked a brief glance around the table. Quarry’s audience was listening intently. (‘The two most interesting things in the world,’ Quarry once remarked: ‘other people’s sex lives and your own money.’) Even Ezra Klein, rocking back and forth like a student in a madrasa, was temporarily still, while Mieczyslaw Łukasiński simply could not keep the grin off his plump peasant face.
    Quarry’s right hand continued to rest on Hoffmann’s shoulder; his left was thrust casually in his pocket. ‘In our business we call the gap between market performance and fund performance “alpha”. Over the past three years, Hoffmann has generated alpha of one hundred and twelve per cent. That’s why we’ve twice been voted Algorithmic Hedge Fund of the Year by the financial trade press.
    ‘Now,’ he went on, ‘this consistency of performance is not, I can assure you, a matter of luck. Hoffmann spends thirty-two million dollars a year on research. We employ sixty of the most brilliant scientific minds in the world – at least I’m told they’re brilliant: I can’t understand a word they’re on about.’
    He acknowledged the rueful laughter. Hoffmann saw that the British banker, Iain Mould, was chuckling particularly hard, and he knew at once that he was a fool. Quarry withdrew his hands from Hoffmann’s shoulder and from his own pocket and placed them on the table. He leaned forward, suddenly serious and urgent.
    ‘About eighteen months ago, Alex and his team achieved a significant technological breakthrough. As a result we had to take the very difficult decision to hard-close the fund.’ Hard-close meant turning away additional investment even from existing clients. ‘And I know that every single one of you in this room – because that is why we’ve invited you here – was disappointed by that decision, and also bewildered, and that some of you were actually pretty angry about it.’
    He glanced at Elmira Gulzhan listening at the opposite end of the table. She had screamed at Quarry down the phone, Hoffmann knew, and had even threatened to withdraw the family’s money from the fund or worse (‘You hard-close the Gulzhans – the Gulzhans hard-close you …).
    ‘Well,’ continued Quarry, with the merest hint of a kiss blown