In April 2006 of the year Victor Niederhoffer (Victor Niederhoffer) appeared at an evening at New York's St. Regis, where about 300 America's leading fund managers. Walking under the gilded candelabra in a lavender blazer, he felt, that again rose to the top of success. 1980-90s. Victor Niederhoffer has built a huge fortune and a reputation as one of the most prominent hedge fund managers in the United States.. But he was ruined by an excessive love of risk.: before the Asian financial crisis, he played for the rise in Thai stocks, and during the crisis - to increase the Standard index&Poor’s 500, using uncovered options on the index. When the markets crashed, Victor Niederhoffer lost everything overnight - a $ 130 million fund and almost all of his own savings. It seemed, life dealt him a crushing blow, however, he managed to overcome the path up the second time. Speaking to financiers, honoring him in St. Regis, Niederhoffer stressed, how highly he appreciates the “difficult and courageous” decision to reward him after, how it crashed once.
Victor Niederhoffer says, that “rose from the ashes” by another person. If his fiasco in 1997 year was largely due to arrogance and self-confidence, that defeat taught him humility. He doesn't count anymore, which can win in any market, and refuses to play in markets in remote areas of the world, such as Thailand, where did he lose $50 million. Instead of this, Viktor Niederhoffer almost completely restricts his operations to the options and futures market for the Standard Index&Poor’s 500, speaking, that "tries not to rush to the stars".
Nevertheless, Niederhoffer has not lost his passion for risk, to which, according to colleagues, he has just supernatural tolerance. As in the 1990s., he prefers bullish positions. Seeking to play on short-term fluctuations S&P 500, he buys and sells various futures and options on that index, making on 20 deals per day. Usually, Victor Niederhoffer retains each position for one to five days. It uses leverage typical of hedge funds to increase profits., making it vulnerable to market dips. In the book "Practice of stock speculation", published in 2003 year, Victor Niederhoffer says, what is life, like the markets, offers the highest reward to topics, who is willing to risk. Risk Means Uncertainty, anxiety and possible loss. However, it also brings out the best, what we have ”.
Victor Niederhoffer manages the operations of two hedge funds from his mansion of 1858 square meters, located in bucolic Weston, Connecticut. A manor is spread around the mansion, whose area is 5,26 hectare. A dozen wooden bulls and bears line the narrow driveway. To the right is the court, on which the owner, multiple US squash champion, practicing tennis shots. Six feet two inches tall, with cropped gray hair, Victor Niederhoffer prefers sports jackets and trousers in pastel colors - pale pink, light blue, peach, yellow and never wears shoes in the house.
On the second floor of the mansion, Victor Niederhoffer and his team of traders work at wooden tables in two rooms, connected by a door. Niederhoffer is known for, which hires young and exceptionally talented traders and educates them in the art of the market game, encouraging them to develop their own trading strategies. What is happening in his office is more like the activity of a scientific laboratory., than a traditional trading firm.
Near Niederhoffer, whom colleagues call "chairman" (“The Chair”), sitting his right hand - 45-year-old Steve Wizdom (Steve Wisdom), nicknamed Mister Wizard (“Mr. Wiz”). Only these two are bidding, using investors' money. The rest of the team is testing ideas with tools, held in a $ 50 million account, which is part of the personal fortune of Viktor Niederhoffer, newly acquired thanks to a successful investment. No one in this office wears shoes, and nobody talks. Sitting opposite each other, employees communicate via email. The stereo system quietly plays songs from Broadway musicals. From time to time someone walks into the kitchen, for a snack or tea for Niederhoffer. And sometimes two disappear, to play squash on the home court, located just behind the library.
The Niederhoffer library consists of more than 15000 books. He owns, in particular, first edition of Adam Smith's Wealth of a Nation and a sketch of a light bulb, by Thomas Edison. One of the authors, whom Viktor Niederhoffer especially admires, – Sir Francis Galton (Francis Galton), Victorian naturalist, who introduced the concepts of correlation and regression and used these statistical methods extensively in his research (among others, he invented a fingerprint identification method). His portrait hangs in the library, and Victor Niederhoffer named the eldest of his six daughters Galt in his honor (Wrong). The third daughter is named Rand. (Rand), given to her in honor of Ayn Rand (Ayn Rand ) - another extremely significant person for Niederhoffer. Rand, American writer and philosopher of Russian origin (her real name is Alisa Zinovievna Rosenbaum), known as the creator of the philosophy of objectivism and an ardent supporter of rational egoism and the theory of "non-interference of the state in the economy" (laissez-faire capitalism). Her ideas, very popular in America, at one time had a great influence on the former chairman FED Alan Greenspan (Alan Greenspan). There are several of her letters in the Niederhoffer library.
Passionate collector, Victor Niederhoffer filled the house 2500 objects of art of the XIX-XX centuries, including paintings, sculptures and carvings. Among them are images of people and places., who played a key role in his life: his father Arthur Niederhoffer (Arthur Niederhoffer), the trading floor of the exchange, as well as Brighton Beach from the 1950s. One of the mansion's rooms contains only glass shelves with sinks., which reflects the owner's deep interest in the evolutionary process. Another hobby is vintage toys..
Following Ayn Rand, Victor Niederhoffer believes, that the moral goal of a person is to strive for his own happiness and achievements, and that free enterprise is the key to prosperity, personal freedom and peace. Also in 1985 year he initiated the creation of NYC Junto – assemblies, dedicated to libertarianism, objectivity and investment. Since then, he has chaired all meetings, taking place on the first Thursday of every month. Meetings prompted the idea of Junto Niederhoffer's intelligent salon, which originated under the same name in Philadelphia with 1727 on 1757 yy. and led by Benjamin Franklin (Benjamin Franklin).
Victor Niederhoffer prides himself on favorable influence, rendered to them on many of those, with whom he had a chance to communicate. More than a dozen employees, who learned from him the art of trading, made fortunes, constituting hundreds of millions, or even billions of dollars. Among them is Monroe Trout (Monroe Trout), Stu Rose (Stu Rose), John Hammer (John Hummer) and Roy Niederhoffer (Roy Niederhoffer). All of them have had major successes in asset management or M&A transactions., M&A.
Now, in the seventh decade of your life, Victor Niederhoffer intends to prove to the world, which is by no means a loser. For even the loss of huge money was not so painful for him, like a loser brand. According to the trader, is he, “No matter how funny it sounds, believes with all sincerity, that he has had the largest streak of success in the history of stock speculation ”.
Victor Niederhoffer's story began in 1943 year in Brooklyn, in a Jewish family. His father, Arthur, in 1939 Graduated from Brooklyn Law School and went to work for the police, since the salary was higher there, and social guarantees are better, than lawyers. Victor's mother, Elaine (Elaine Niederhoffer), taught at school. The boy grew up in a small apartment, decorated in a striking decorative art deco style and located one block from the coast, train station and public school room 225.
The then Brooklyn was, according to the memoirs of Niederhoffer, "The capital of the underprivileged world" – city of hard workers, rebels and losers, one mention of which “is enough, to see raised eyebrows or to hear giggles and jokes ". But Victor is convinced, that Brighton Beach gave him many useful lessons, thanks to which he was able to become a successful trader. He wrote, what “games, deals, music, sex and fauna taught him to appreciate the low and routine aspects of life ", and this is “a necessary basis for buying on a fall and selling on a rise – the profession of a stock speculator ".
Streets of Brighton Beach, teeming with gamblers and dandies, were Harvard of his boyish years. Victor Niederhoffer spent the weekend, watching that, like guys with colorful nicknames like "Evil Irwin" or "Animal" play handball, and how bets are placed on their game. According to his uncle Howard Eisenberg (Howard Eisenberg), Victor was seized by the childish desire to be like champions, and “it became extremely important for him to fight and win”.
Arthur taught his son to play tennis early. For five consecutive years, Victor became the New York junior champion, what brought him, besides fame, eligible for Harvard University scholarship. Entered there in 1960 year, Niederhoffer became interested in squash, which he had never played before. Nevertheless, not yet stepping on the court, he declared, what will become the champion. Victor practiced one hit every day for a month, until I mastered it completely, and then move on to the next. Eisenberg later told, that his nephew often wore different sports shoes on the court, as a result of which he gained a reputation as an eccentric and eccentric.
A year later, Viktor Niederhoffer really won the national championship among juniors, and by the time he graduated from university in 1964 year received the title of champion among students of American universities. Subsequently, Niederhoffer won five US championships in singles (record, surpassed only by Stanley Pearson (Stanley Pearson), received the sixth title in 1923 year) and won national tournaments in pairs three times. IN 1975 year he defeated the legendary Sharif Khan (Sharif Khan) in the final of the US Open Squash Championship. This was the only time since 1969 on 1981 year, when Khan failed to keep the lead.
Viktor Niederhoffer is recognized as one of the best players in squash history and is inducted into the game's hall of fame. At the same time, journalists, and the players celebrated, that he was very little like other top squash players and was never a "graceful athlete". With his tall stature and powerful figure, he looked bulky and oddly inflexible. According to his coach, legendary Jack Barnaby (Jack Barnaby), Victor did not have a great natural talent, but he had extraordinary zeal and fighting spirit, and he worked harder, than any other of his students. Niederhoffer's partner at the US Championship 1968 Vic Elmaleh (Vic Elmaleh) was convinced, that Victor won, first of all, due to its consistency and self-confidence.
The multiple champion himself spoke, what's the difference between winning and losing, usually, hanging on a thin thread ", and that, who is ready to give everything to the game, what does she require, and a little more, has the potential for greatness ”. Reflecting on the reasons for your success, he recalled the words of Francis Galton that, that all outstanding people combined four properties: perseverance, organization, health and ability. According to Niederhoffer, thousands of players were stronger, fast, flexible, than he, had the best punch, however, in none of them were these qualities combined with such perseverance and organization.
Coming out of the walls of Harvard with a Bachelor of Economics, Victor Niederhoffer went west, to the University of Chicago, where in 1969 defended his doctoral dissertation. With 1967 on 1972 yy. he taught finance at the University of California. 1960-70s. Niederhoffer has published a number of articles on market inefficiency, which caused considerable interest and numerous disputes among specialists. Like playing squash, and developing scientific ideas, he preferred an unconventional approach. His dissertation “Non-random nature of stock price fluctuations: new model of price dynamics ” (“Non-Randomness in Stock Prices: A New Model of Price Movements”) challenged the then accepted random walk theory, according to which stock prices move haphazardly and unpredictably. Victor Niederhoffer hypothesized, what courses shares change according to certain schemes. For example, he found out, what, if stocks fell on friday, then, usually, they went down the next Monday. According to Ronald Wolpe (Ronald Volpe), Professor of Finance at Youngstown University, Ohio, "In those days it was considered a scientific heresy".
However, purely academic work did not appeal to Niederhoffer. Before coming to Berkeley, in 1965 year, he teamed up with a former Merrill Lynch employee & Co. Frank Cross (Frank Cross) and a friend from Harvard times, by Richard Zeckhauser, Doctor of Economics (Richard Zeckhauser), founded a brokerage firm with start-up capital of only $400 called Niederhoffer, Cross & Zeckhauser, abbreviated as NCZ. (Today this company is called Niederhoffer Henkel and is managed by Lee Henkel. (Lee Henkel), former General Counsel of the Internal Tax Service.) Partners bought small private companies through advertisements or letters and then found suitable buyers from public companies. Victor Niederhoffer also bought many private firms with Daniel Grossman (Daniel Grossman), his partner for 40 years. According to Grossman, Niederhoffer went into business, shrouded in a veil of mystery, - agreements between the management of investment banks and companies were concluded in private clubs - and began to promote it with the help of marketing strategies.
Just like on the court, Victor Niederhoffer was very eccentric, to impress customers and unbalance competitors. According to the memoirs of Henry Yushkevich (Henry Juszkiewicz), who worked at NCZ in the 1980s., at meetings with clients, he looked "extraordinary and brilliant", and he “only needed to throw a few glances, for the agreement to be signed ”.
IN 1979 Niederhoffer decided to start trading on the derivatives exchange market, starting with gold and silver, and then moving on to fixed income and foreign currencies. He hired students to enter historical market data into computers 12 Radio Shack TRS-80, which connected to each other. Being a practitioner, Victor Niederhoffer wanted, to make his trading operations based on data, not on intuition alone, and used a hastily constructed computing device to detect predictable correlations between markets.
IN 1980 the trading company NCZ Commodities was founded, Inc., also known as Niederhoffer Investments, Inc. Truth, Zeckhauser soon found, that Niederhoffer's operations had become overly risky, and left the joint venture in 1983 year, fully dedicated to a scientific career. He is now a professor at John F Business School.. Kennedy at Harvard University. Another partner, Cross, died in the 1980s. Victor Niederhoffer continued to go from one luck to another.. Niederhoffer Investments has become one of the leading financial advisors in the field of futures, options and shares. In the early 1980s. the trader's success was noticed by George Soros (George Soros), who entrusted him with the management of a separate account. Victor Niederhoffer has been making high profits for over ten years, managing Soros funds up to $100 million, invested in fixed income instruments and the foreign exchange market, however then I realized, which starts to lose its advantages, and closed the account myself. In the "Alchemy of Finance" Soros Noted, that Victor was the only one of his managers, voluntarily resigned, when things were still going well. The great financier praised Niederhoffer so highly, that he sent his son to work under his leadership and study, how to trade.
By the mid-1990s. Victor Niederhoffer was considered one of the leading futures traders in the United States. Average annual return, received by Niederhoffer Investments since its inception by 1996 year, amounted to 35%. According to the results 1996 of the year, the New York agency MAR Hedge awarded her the palm in its rating of companies, hedge fund managers. IN 1994 Business Week named Niederhoffer the best fund manager in the futures market in America. And he himself recalled, that “in one happy month” his photograph was published in several reputable publications at once, namely Business Week, National Enquirer, Financial Trader и Wall Street Journal.
IN 1997 Victor Niederhoffer published the bestselling book "The Universities of the Stock Market Speculator" (“The Education of a Speculator”), in which autobiographical features are uniquely combined with investment ideas. The author leads the reader in the footsteps of his "odyssey" – from Brighton Beach to Wall Street, – talking about his squash tricks along the way, risky market transactions, chess and tennis competitions with Soros. The latter noted, that Niederhoffer's book “penetrates the very essence of things and is useful as professionals, so and amateurs ”. Barron’s magazine described her as one of the great phenomena of investment literature., which should be a necessary part of the library of any serious investor.
However, Viktor Niederhoffer barely managed to publish the book, trouble befell him, depriving him of not only money, but also reputation. IN 1997 year trader saw too few opportunities for successful speculation in stable liquid markets, and his eyes turned to the markets of developing countries, who at that moment were on the rise, but for operations on which he did not have the necessary experience. He started playing Mexican and Turkish stocks and hired a gambling veterinarian named Steve Keely. (Steve "Bo" Keeley), for him to travel the world and assess the situation in developing economies from the bottom up. Keely reported from Thailand, that his economy looks strong, basing your opinion, in particular, on improvements, incidents in the management of brothels in Bangkok.
Based, among other factors, on Keely's posts (who now lives in a burnt-out trailer in the Southern California desert), Victor Niederhoffer has invested heavily in shares of Thai banks. His calculation was based on the fact, that the state will not let these banks fail. By then, Thailand's economy, one of the fastest growing in the world, has already been "overheated", and the volumes of loans issued by banks were huge. 2 July Bank of Thailand canceled the pegging of the national currency, blessing, to the dollar, and its exchange rate against the dollar fell by more than 19% per day. By August, losses on Niederhoffer positions reached $50 million. In the fall, the financial crisis that began in Southeast Asia spread to Brazil and Russia, however, Niederhoffer was still optimistic. Deciding to take advantage of the Standard Index&Poor’s 500, he purchased options on this index, but did not hedge positions.
The catastrophe has come 27 October 1997 of the year, when the American market hit 7,2% and the New York Stock Exchange, NYSE, was forced to stop trading half an hour before closing. When broker Niederhoffer, company Refco, demanded additional security, he had no money. He was forced to stop operations and owed Refco $2 million. Victor Niederhoffer later filed legal action against the Chicago Mercantile Exchange, WE ARE, where did you trade options, claiming, that the traders of the exchange that day conspired to drop prices, to force him to sell. Some traders believed, that Refco's actions could have caused Niederhoffer's losses in the amount of $35 million.
Victor Niederhoffer mortgaged his house and sold a collection of antique silver at Sotheby's auction. Colleagues left him; he became a Wall Street pariah, the object of contemptuous ridicule and gossip. When he entered the restaurant, started to whisper around. Niederhoffer was completely depressed and did not know, what should he do. He is so used to it, that many things were done for him, that at first I could not even find my own kitchen. His sister Diana, psychiatrist, sent him a list of 10 symptoms of clinical depression, and he found every last one. The family was seriously afraid, that Niederhoffer would commit suicide, and someone was constantly watching him, when he was alone. For a while, he escaped depression by reading novels., as well as electronic homemade products.
Gradually the pain of defeat began to subside. Having six children and a lot of expenses, Victor Niederhoffer , in his own words, could not afford the luxury of reveling in my misfortune. To help him get back on his feet, his friend Al Hallack (Al Hallac), Managing Director of Weston Capital Management LLC, established a small hedge fund, named Wimbledon Fund Ltd. This name reflects Niederhoffer's love of tennis. The Foundation began operations in 1998 year, but start, naturally, it was not easy. Niederhoffer told, that brokers did not want to open accounts for him. Some, afraid to get hurt, if it crashes again, forced him to deposit double or triple the usual amount. According to Niederhoffer, brokerage firms did not want to open an account for him, not only fearing losses, but also not wanting to risk their reputation.
In parallel, Viktor Niederhoffer began his career as a financial journalist. With Laurel Kenner (Laurel Kenner), former editor of Bloomberg News, he is with 2000 on 2003 yy. hosted a popular weekly section, dedicated to markets, для CNBC MoneyCentral. Niederhoffer and Kenner co-wrote a book called "The Practice of Stock Market Speculations" (“Practical Speculation”). Published in 2003 year, it has been named "The Best Trading Book of the New Millennium" by Active Trader Magazine. Besides, they set up a website dailyspeculations.com, which the, besides market commentary, publishes interesting materials about barbecue, parenting, physics, plants and other various things, interesting to its creators.
In July 2001 of the year Viktor Niederhoffer has a long-awaited chance, which he grabbed with both hands. Mustafa Zaidi (Mustafa More), one of his former investors, offered him to manage the assets of the offshore fund Matador Fund Ltd. This fund was established by Zaidi for institutional investors in Europe and South Africa.. In February 2002 of the year, when Matador started trading, his assets were only $2 million. According to Zaidi, first met Niederhoffer at a Junto meeting in 1994 year, his only fear was, that Victor will again rush to unfamiliar markets. So he gave Niederhoffer clear instructions: trade only options and futures contracts on the Standard index&Poor’s 500.
Since then, Matador's assets have grown steadily and by the summer 2006 years reached $346 million. IN 2005 year the fund's profitability was 56%, and the average annual return was at the level 41%. Truth, its results were not stable. Fund suffered 30 percent loss in July 2002 years due to the fall in American stock prices. IN 2005 year he lost 12,7% in April and 5,42% in October. However, Niederhoffer's deputy Wizdom, knowing the boss with 1983 years and following that, so that he does not again get carried away by an overly risky game, considers, that the situation is under control. He defends the Niederhoffer strategy, claiming, that risk is a necessity, if the fund aims to obtain profitability at the level 25% or more.
In February 2006 of the year Victor Niederhoffer and Zaidi opened Matador fund for other investors. Niederhoffer also set up a second hedge fund, Manchester Partners LLC, which the, unlike Matador, available to American investors. The name of the fund is associated with a single item from the silver collection, which Niederhoffer retained after the collapse 1997 of the year, – Manchester Cup, presented to the winner of the Obstacle Race in Manchester, United Kingdom, in 1904 year. Jamie Fee (Jamie Fee), marketing Manchester, considers, what the fund's assets can achieve $400 million, but Niederhoffer “needs investors, ready to take risks ". On 1 May 2006 of the year Manchester's assets were $28 million. Manchester, unlike Matador, not limited in the choice of investment objects, and Niederhoffer is already looking at other markets, hoping to trade in fixed income and foreign exchange instruments in the future. But so far, the portfolios of both funds are very similar..
3 May 2006 of the year Niederhoffer and Laurel Kenner had a child - a long-awaited son. Rumor has it, the gender of the baby was planned in advance, since it appeared as a result of the IVF method (Test tube baby). The boy was born by a surrogate mother. Happy father named his son Aubrey after the captain, the hero of the novel by Patrick O'Brien (Patrick O’Brian) "Master of the Seas". Just a few days after he was born, he took his son for lunch at his favorite restaurant "Four Seasons". Now Victor Niederhoffer is in the process of divorcing his second wife., Susan.
In the music room of the Niederhoffer mansion, over a huge piano, hanging picture, depicting the "Essex" - a 19th century whaling ship. Niederhoffer loves to tell his story, resembling, how much does he gamble, tempt fate a second time. In August 1819 of the year "Essex" left the shores of America, going to search for whales in the South Pacific, but was rammed by a sperm whale. Captain George Pollard (George Pollard) And 19 crewmen tried to reach the coast of Peru in three boats. After three months of painful swimming, during which several deceased sailors were eaten by their comrades, eight survivors were rescued. This story inspired Herman Melville (Herman Melville) to write a novel "Moby Dick". Subsequently, Pollard only once went to sea as captain of the whaling ship "Two Brothers". In February 1823 this ship also sank, crashing on a coral reef. Pollard returned to his homeland as a pariah and ended his days as a night watchman. “In America, a man is given a second chance, – says Victor Niederhoffer, telling this story. “There is no third chance”.