In Gary Shteyngart’s first novel, The Russian Debutante’s Handbook, he related the travails of being an Russian immigrant in downtown New York in the 1990s. He then parodied his own book as The Russian Arriviste’s Handjob in his second novel.
He then spent a lot of time in Silicon Valley (and even became a “glasshole,” which is to say, an early adopter of Google Glass, paywall) to research the dystopian Super Sad True Love Story. In his latest novel, Lake Success, Shteyngart turns his attention to the world of finance.
The book is about Barry Cohen, a hedge-fund legend with $2.4 billion in assets who is having an existential crisis as every aspect of his life falls apart. Cohen leaves everything behind to criss-cross America in a Greyhound bus with only a few $20 bills to his name. “Like your first ankle-monitor bracelet or your fourth divorce, the occasional break with reality was an important part of any hedge-fund titan’s biography,” Shteyngart writes (paywall).
For research, Shteyngart told the Wall Street Journal (paywall) he spent a lot of time with finance bros in New York, boarding private jets, attending parties, and getting so drunk he was unable to unbutton his own shirt. When he asked these putative Masters of the Universe to explain the motives of rivals in their world, Shteyngart said that “they would say, ‘His wife doesn’t really love him,’ ‘His mother never loved him enough,’ ‘His children really hate him.’ So many of them were missing fundamental pieces of themselves, and the money was supposed to fill in for those pieces.”
Perhaps the most useful piece of advice he was told was how to invest. Shteyngart recalls:
“Some of the coolest guys I’ve ever met in this industry say, ‘Let me tell you a secret, Gary: low-cost index funds,’ ” he said. “They’re like, ‘Don’t invest in our stuff. Just low-cost index funds.’”
Which makes sense. Many ordinary investors, having realized it’s difficult to pick the right individual stocks themselves and outperform the stock market, are instead pouring money into low-cost index funds that track standard benchmarks. Exchange-traded funds (ETFs) and mutual funds now have trillions in assets and number 3.3 million worldwide—70 times more than the number of publicly listed companies.
While ETFs are surging and US stocks soared into their longest winning streak in history, hedge funds are struggling to attract capital and justify their high fees. A well-publicized hedge fund backed by some very big names in the industry closed earlier this month (paywall). Billionaire David Einhorn’s Greenlight Capital has seen its assets under management shrink by more than half, to $5.5 billion, since 2014 (paywall).
All of which would have been old news to Shteyngart’s new pals.