Top Producer by Norb Vonnegut

quivering from fear or hesitation or both. “Maybe it’s a favor.”
     
“Name it,” I replied, empowered by Sam’s request for help. “What can I do?”
     
“I’m not sure where to start.”
     
“Just spit it out.”
     
“I feel so stupid,” she confided uneasily.
     
“Come on, Sam. It’s Grove, remember? I wrote the book on stupid.”
     
“Charlie handled all our money,” she began. “Every dime, every dollar, went into the Kelemen Group.”
     
     
     
     
     
 
     
     
 
     
     
    CHAPTER TWELVE
     
     
 
     
     
 
     
     
 
     
In finance lingo the Kelemen Group was a “fund of funds.” Charlie invested in hedge funds and charged an annual fee of 1 percent on assets. He also kept 10 percent of profits. If the portfolio grossed $10 million, his shop earned $1 million in participation fees. Not a bad payday.
     
The company was nothing if not successful. Crunch once told Charlie, “If I had your money, I’d burn mine.”
     
There was no need. My friend, the fat man with the lean childhood, torched cash. He spent freely, almost drunkenly, flashing and flushing and frivoling away his funds as though the markets would always cooperate. During lavish nights in New York City, Charlie picked up tabs without fail. Dinner for ten at Le Cirque or tickets to the hottest shows on Broadway made no difference. He paid for everyone and everything with crisp hundred-dollar bills. I never saw him use a credit card. Not once.
     
At times the gaudy display made me uncomfortable. But Charlie told me to lighten up. “Sales 101, Grove. Gotta spend money to make money.”
     
The marketing budget may have been boundless. In all other ways Charlie ran a tight ship. Modest office on Broadway. Basic computers. No flat-screen televisions tuned to CNBC or Fox Business. The Kelemen Group neverhired MBAs to cull through market-neutral or long-short funds. Nor were there teams of quant jocks building 10,000-line Excel spreadsheets that optimized the right mix among convertible-bond, event-driven, and other money management styles. There were just two employees at the Kelemen Group, Charlie and his fifty-something receptionist named Martha.
     
“Size doesn’t matter,” Charlie once explained. The comment was no joke. It was the cornerstone of his investment philosophy. “Access to the best managers is what’s important.”
     
He was right in one sense. The best hedge funds enjoyed more demand than supply. Drawing on provisions from Section 3(c) of the Investment Company Act, hedgies minimized regulatory oversight by limiting the number of their investors. As a consequence, top-performing funds became the Studio 54s of finance. They granted admission or turned away investors from the performance-hungry crowd. Hedgies based their decisions on what people brought to the party—like the size of their checkbooks or whether investors could drive investment performance through industry knowledge.
     
Charlie celebrated this supply-demand imbalance. “We get into the funds you can’t.”
     
He used the extravagant parties and charity benefits to build relationships with elite money managers. And it paid off. “For years,” Charlie often said, “my company has been generating twenty percent after fees. Like clockwork.” It never surprised me when hedge fund legends, Alex Romanov or Jason Tropez, showed at Kelemen functions. Both had attended the ill-fated party at the New England Aquarium, Tropez with wife and mistress in tow.
     
Charlie rejected analytical tools like Sharpe ratios. “Excess return per unit of risk,” he mocked, “give me a break. Math works in the rearview mirror. All the analysis in the world won’t tell you when a manager is about to suck.”
     
Due diligence was neither heavy nor light at the Kelemen Group. It was unorthodox. Competitors ran numbers trying to identify hiccups in investment strategies, whereas Charlie tried to burrow inside the heads of his managers. “It’s how we make