The Prince of Risk A Novel(14)

In the end, Astor couldn’t really care less where the money came from. It was Reventlow’s reputation as an investor who expected quick returns and who pulled his money if he didn’t get them that bothered him. The hedge fund business had a term for people like Septimus Reventlow: hot money. It was not a compliment.

“We’re set on investing now,” said Reventlow. “We sold some of our interests in the Far East and enjoyed a rather significant financial event. We don’t like our capital to lie fallow.”

And that was the problem with hot money, thought Astor. It was always chasing the highest returns, moving in and out of funds like some horny teenager rushing from bar to bar chatting up the girl with the blondest hair and the biggest boobs. If he got lucky in ten minutes, he stayed. If not, he moved on to the next one.

One stellar quarter did not a track record make.



Hedge fund managers liked continuity. They sought to build assets quarter after quarter, year after year. They preferred clients who shared their investment philosophy and were with them for the long term (barring a nuclear meltdown or the equivalent, say a loss of 10 percent or more in any one year). Reventlow was as rich as a Rockefeller, but he invested like a riverboat gambler.

“Look,” said Astor. “I understand your not wanting your money to sit around earning money market rates. I’m sure we can find an arrangement. All of my other funds would welcome your investment. I can get our managers in here in two minutes. I think it would be worth your time to hear what they have to say.”

“The Astor fund,” said Reventlow, as if stating a decree. “And yes, I’m sure we can find an arrangement.”

Astor smiled, if only to keep from punching Reventlow in the teeth. There was a method to his madness. Increasing his position in the yuan was not simply a matter of calling up his broker and buying another ten or twenty thousand contracts. Comstock Astor currently held $3 billion in its coffers, give or take. Of that, Astor had a billion down against the yuan, or had shorted it, meaning that he was betting it would depreciate in value versus the dollar.

Here’s how the math worked. To speculate on currency, you bought contracts that stipulated what that currency might be worth thirty, sixty, or ninety days in the future. One contract controlled $1,000 worth of the currency. Astor had purchased 200,000 contracts, giving him control of $20 billion worth of the currency, or around 126 billion yuan. But Astor didn’t have to put down the entire $20 billion. According to the margin requirements as set forth by the Chicago Board Options Exchange (CBOE), the organization that looked after currency trading, he needed to deposit only 10 percent of the contracts’ value, in this case $2 billion. Astor put in a billion himself. He borrowed the other billion from banks that specialized in this kind of thing, thus leveraging his position twofold.

If he took $300 million from Reventlow, he would have to go to all his lenders and renegotiate his agreements.

“No,” said Astor. “We can’t.”

“Excuse me?”

Astor stood and made a point of looking at his watch. “We can’t find an arrangement. Fund closed. Is there anything else?”



Reventlow’s brow tightened, and red arrows fired in his cheeks. “We are both talking about three hundred million dollars?”

“Three hundred million or three billion, it’s all the same.”

“But—”

“I’m sure you’ll be pleased with our returns this quarter, however. We’re expecting a major event ourselves in our primary position. Now, if there’s anything else…”

“You can’t turn me down. I have to—we have to—invest this money.”

Astor moved toward the door. “Goodbye, Septimus.”

Septimus Reventlow rose from his chair, his pale face paler, his calm demeanor ruffled, a man in the first stages of shock. Clearly, no one had ever told him to take $300 million and shove it up his ass.

Astor allowed Reventlow to walk himself out of the office. Returning to his desk, he opened his drawer and popped a Zantac. It was barely ten o’clock and his stomach was already acting up. He wasn’t sure what was going on inside his gut, only that it felt like Vesuvius getting ready to blow.

Reventlow.

Hot money always did that to him.

Astor passed Shank on the way out.

“What’s up?” said Shank. “You can’t just skip out.”

“I have something I need to do.”

“Like?”

“I’ll tell you later.”

“What about the position?”

Astor stopped at the door. “What about it? Everything’s fine. Just a blip.”