Cut me in to the hedge fund, boys
Jeremy Clarkson
I have no idea what a hedge fund is, but after a day trip to Mustique last week I think I need to plant one.
At first I couldn?t quite work out whether this privately owned island in the Caribbean is heaven on earth or a small piece of hell. Certainly it?s the first country I?ve ever been to which is completed mowed, from end to end, in nice neat strips. Honestly, I?ve been to dirtier, messier nuclear laboratories.
It seems sanitised somehow, but then I thought, what?s wrong with that? A lot of very rich people have come here and built a world where there is no crime, no disease and no unpleasant working-class people on the beaches. Not unless they?re in an apron and they?re toiling over a barbecue, roasting yams.
After a day drinking wine, and swimming in the preposterously turquoise sea, going back to Barbados felt like going back to Birmingham. As our little plane took off from the freshly mowed airfield, I looked back and thought: ?No. Mustique is more than all right. It?s living, breathing proof that the resurrection?s a load of nonsense.?
Because if Jesus really had come back from the dead, he?d still be alive today. And if he were still alive, it?s sensible to assume he?d be living in the best place on earth. So he?d be in Mustique. And he wasn?t.
Of course, some of the 90 or so houses that sit like big wedding cakes on the newly mown hillsides belong to high-profile stars such as Mick Jagger, Tommy Hilfiger and Stewart Copeland ? the second of only two policemen on the island. But the vast majority belong, it seems, to hedge fund managers.
Now I can describe these people to you very easily. They are all quite young, and they all appear to be super-fit. None smokes. Few drink. All have swept-back hair and dazzling teeth, and all, you imagine, would quite like to murder someone, to see what it?s like. You?re thinking Bret Easton Ellis. So am I.
They are also lip-slobberingly rich. There are estimated to be 9,000 funds worldwide which, between them, have assets of $1,500 billion. So they?re not really hedges at all. They?re bloody great leylandii.
What?s more, a whopping 78% of all the hedges in Europe are grown and nurtured in London. That?s $255 billion. And that?s great, but before we get too excited, we must first of all try to work out what a hedge fund is.
According to a friend in the City, they?re brilliant because whether the stock market goes up or down, you still make pots of money. Great. Sounds like my kind of gambling. But what are they exactly?
?Ah well,? she said. ?You rent shares from someone who has a lot of them and then you sell what you?ve rented.? Now this, so far as I can tell, is actually called ?theft?. Small wonder they?ve all got houses on Mustique. They?re all burglars.
?No,? said my friend, ?because you always pay back the person you?ve rented them from, plus interest.? I see, so you rent some shares, sell them, and then give the profit (if you?ve made any) to the person from whom you did the renting. That seems like a lot of effort and risk for no gain at all.
My friend became exasperated and told me to stop thinking so literally because the money never actually exists. ?It?s like a house of straw then?? I asked. ?No,? she tutted. ?It?s like a house of straw that?s a hologram. It isn?t there.?
On the world wide internet, a hedge fund is described thus: ?A fund, usually used by wealthy individuals and institutions, which is allowed to use aggressive strategies that are unavailable to mutual funds, including selling short, leverage, programme trading, swaps, arbitrage, and derivatives.?
Gibberish. And galling, too, because I?m not a stupid man. I?m able to grasp the most complicated concepts, especially if it means I can walk away from the table six years later with ?100 billion in my back pocket, a Gulfstream V and a house on Mustique. But this hedge fund business was eluding me.
One thing I did note was that hedge funds are not regulated like normal share dealings. I?m not surprised. How could a flat-footed policeman possibly be expected to investigate a house of straw that doesn?t exist? And there?s something else. While hedge funds operate outside the law, don?t exist, and always make money whether the market rises or falls, 85% fail. How?s that possible? That would be like losing money at the races whether your horse came in first, third, or in a big tube of Evo-Stik.
To find out, I turned to a publication called Money Week which, in a lengthy and indescribably boring article, explained why hedges are starting to crumble. There are many reasons, apparently, none of which I could understand. But all of which are wrong.
I?ve given it a moment?s thought and I know exactly why the business is in trouble. It?s obvious. In order to function, hedge funds need wealthy investors. But as my recent trip to Mustique demonstrated, all the world?s richest people these days are hedge fund managers. This, then, has become a business that can only invest in itself.
Soon these guys are going to have to forget about the super-rich and chase down those who are simply well off. That?d be me, and that?s great. Lend me your house on Mustique for two weeks next Easter, and we?ll talk.