The Fear Index

madness, Hugo. This level of risk is far outside what is promised in our prospectus. If the markets were to rise strongly, we would be left facing billions in losses. We might even go bankrupt. Our clients could sue us.’
    Ju-Long added: ‘Even if we continue trading, it will be unfortunate – will it not? – if the board of the fund has to be notified of our accelerated risk levels just as we are approaching individual investors to put another billion dollars into VIXAL-4.’
    ‘They will pull out,’ said van der Zyl mournfully. ‘Anyone would.’
    Quarry was unable to sit still any longer. He jumped up and would have paced around the office but there wasn’t sufficient room. That this should happen now, after his two-billion-dollar pitch! The unfairness of it! He clawed the air and grimaced at the heavens. Unable to stomach Rajamani’s expression of moral superiority for a moment longer, he turned his back on his colleagues and leaned against the glass partition, his palms spread wide, staring out at the trading floor, heedless of who was watching. For a moment he tried to visualise what it would be like to manage an uncontrolled, unhedged investment fund exposed to the full force of the global markets: the seven-hundred-trillion-dollar ocean of stocks and bonds, currencies and derivatives that rose and fell ceaselessly against one another day after day, whipped by currents and tides and storms into vast maelstroms that no one could fathom. It would be like trying to cross the North Atlantic on an upturned dustbin lid with a wooden spoon for a paddle. And there was a part of him – the part that saw existence itself as a gamble that sooner or later one was bound to lose; the part that used to bet $10 K on which fly would take off first from a bar table, just to feel the thrill of fear – that side of his personality would have relished it, once. But nowadays he also wanted to hold on to what he had. He enjoyed being known as a rich hedge-fund manager, the cream of the elite, the financial equivalent of the Brigade of Guards. He was ranked 177 in the latest Sunday Times rich list; they had even printed a picture of him on the bridge of a Riva 115 (‘Hugo Quarry leads the dream bachelor life on the shores of Lake Geneva – and why not, as CEO of one of the most successful hedge funds in Europe?’). Was he really going to jeopardise all that, just because some bloody algorithm had decided to ignore the basic rules of investment finance? On the other hand, the only reason he was on the rich list in the first place was because of the bloody algorithm. He groaned. This was hopeless. Where was Hoffmann?
    He turned and said, ‘We really need to talk to Alex before we put on an override. I mean, when was the last time any of us actually did a trade?’
    Rajamani said, ‘With respect, that’s not the point, Hugo.’
    ‘Of course it’s the point. It’s the whole point and nothing but the point. This is an algorithmic hedge fund. We’re not manned up to run a ten-billion-dollar book. I’d need at least twenty top-class traders out there with steel balls, who know the markets; all I’ve got are quants with dandruff who don’t do eye contact.’
    Van der Zyl said, ‘The truth is, this issue should have been addressed earlier.’ The Dutchman’s voice was rich and deep and dark, marinated in coffee and cigars. ‘I don’t mean that we should have thought about it earlier today – I mean we should have done it last week or last month. VIXAL has been so successful for so long, we have all become dazzled by it. We have never put in place adequate procedures for what to do if it fails.’
    Quarry knew in his heart that this was true. He had allowed technology to enfeeble him. He was like some lazy driver who had become entirely reliant on parking sensors and satellite navigation to get him around town. Nevertheless, unable to conceive of a world without VIXAL, he found himself rising to its defence. ‘Can I just point out that it hasn’t failed? I mean, the last time I looked, we were up sixty-eight mil on the day. What does the P and L say now, Gana?’
    Rajamani checked his screen. ‘Up seventy-seven,’ he conceded.
    ‘Well, thank you. That’s a bloody odd definition of failure, isn’t it? A system that made nine million dollars in the time it took me to shift my arse from one end of the office to the other?’
    ‘Yes,’ said Rajamani patiently, ‘but it is a purely theoretical profit, that