‘Diary of a Very Bad Year’ turns financial tragedy into literature

Howard Davies once lamented the paucity of finance fiction. “Most of our novelists are more preoccupied with life after working hours and below the waist,” said the director of the London School of Economics and chairman of the judging in 2007 for Britain’s Man Booker Prize for fiction.

“That is understandable, up to a point — even investment bankers make time for affairs, I am told — but limiting,” he continued.

For the literati, it seemed, finance was dull, if not gauche: What happened on Wall Street during daylight hours was both unintelligible and uninteresting.

A few weeks after Davies made those comments, however, Bear Stearns was forced to take huge write-downs when two hedge funds it was running imploded; Northern Rock, one of Britain’s biggest mortgage banks, collapsed; and there was a run on the world’s banks.

Suddenly, finance became fascinating to a much wider group of people. And along came “Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager,” published in June by Harper Perennial.

Although it is not fiction, the book is an attempt to bridge the gulf between the literary and financial worlds.

The conceit is straightforward enough: The book is a series of transcribed interviews conducted in 2007 and 2008 between an unnamed, highly articulate hedge fund manager based in Manhattan, and Keith Gessen, the editor of n+1, a voguish literary magazine in New York.

It is eminently readable. The format, which is simple and clear, works well as a structure on which to display the unfolding market crisis. Each new interview conveys a redoubled sense of urgency.

Although the book is thick with financial jargon from the outset, that just adds to its credibility. Too often, a lot of financial crisis writing spends too much time explaining market mechanics in a way that spreads more confusion than clarity.

The exercise is carried off by the personality and charisma of “HFM,” the anonymous hedge fund interviewee. But while he is never hectoring, and always engaging, he is nevertheless just one fallible individual, with one fallible viewpoint, who is cast, sometimes fawningly, in the role of market oracle.

The commentary in the book rings true, but it is also expansive, and at times wanders around the point, perhaps understandably. Gessen, who is putting the questions, honestly confesses that “I’d never heard of any of this stuff.” (His opening gambit is to ask whether the U.S. is now a “Third World” country.)

The conversation has its moments of wince-making contrivance, too. “You know, you have a beautiful mind …” is a bit of a milquetoast setup for what would otherwise be a very well-aimed question to put to a hedge fund manager. “Do you feel that your mind is being used right now in history in the best way it possibly could?”

HFM evades the point, but it becomes increasingly clear as the interviews go on — and the financial crisis unfolds — that the answer is probably no.

“I have enough money, I don’t need this headache any more, I’m going to work on fixing the toilets in my house,” HFM says.

Indeed, there are plenty of hedge fund managers in the world who have recently come to the same conclusion — or been forced to.

The more personal elements of the transcripts — whether being rude about colleagues, getting bullied by investment bankers or wishing for a three-day week — make for the most interesting reading. The dialogue shifts gear from being a comprehensive, if hardly original, recounting of the market crash, to a more personality-laden conversation about the highs and lows of working in finance and the hedge fund industry in general.

Ultimately, though, “Diary of a Very Bad Year” has its limits. It is, after all, simply a series of transcribed interviews. HFM’s answers often have perspicacity and charm, but there is only so much you can learn from someone whose identity is just three initials.

Sam Jones is hedge fund correspondent for the Financial Times of London, in which this review first appeared.