The Secretive World of Hedge Funds
The latest addition to Showtime’s programming lineup attempts to shine new light on the secretive world of hedge funds. Billions focuses on the life of hedge fund manager Bobby Axelrod (Damian Lewis) as well as the ambitious U.S. Attorney Chuck Rhoades (Paul Giamatti) who pursues him. We’ll save the full breakdown of the program for our upcoming podcast on this subject. But The Options Insider is always monitoring the portrayal of derivatives finance across media ranging from books to movies. Billions joins a long list (Big Short, Madoff, etc) of recent attempts to make high finance palatable as entertainment for the masses. But Billions outdoes its competitors with one of the least-flattering portrayals of options traders in recent memory.
Mocking the Hedgers
The scene in question takes place in Episode 2 (at about the 43 minute mark for those inclined to view it for themselves). Allow us to set the scene for you: One of Axelrod’s largest investors is being courted by a rival hedge fund. Axelrod decides to interrupt their dinner meeting and win back his investor. In the resulting exchange we learn a surprising amount about Axelrod’s, and presumably the writers’, views on options as a hedging vehicle. The writers also go out of their way to inform the audience that the rival hedge fund manager is from Chicago, just in case the nuances of derivatives finance are lost on the viewers. After all, if he’s a fund manager from Chicago then,?by the Hollywood transitive property, he must use options. Here’s the resulting exchange between Axelrod and the rival fund manager Ken:
- Axelrod: I’d like to call you Sir Ken…but you were born in Chicago and no one born there was ever knighted….
- Ken: Well, now that you’ve joined us. Let me ask you – how you doing?
- Axelrod:…It’s a crush the other guy business. It’s like Highlander – there can be only one. I don’t blame you Ken. I’d do the same thing. But I’m up 32% this year. Which, from what I know of your run-and-hide approach is thirty points better than what you are at Vista Verde.
- Ken: Well, you can call it what you want. But I call it careful. Risk averse…Which is why I hedge my investments. I protect the downside. I may not be a rock star but I’m still plugging away all these many years later.
- Axelrod (turning to his investor): Have fun with your plugger.
Better Optics
“Plugger” is about the most charitable term used to describe Ken’s options-centric investing style. You’ll have to watch the full episode to view the later, less family-friendly exchange between Axelrod and his investor on the subject. While denigrating hedging as a strategy, Axelrod’s investor also reveals that he is switching to Ken’s fund for the “optics.” He’s directly implying that Axelrod’s high-risk trading style and lifestyle are simply too troubling for his pension fund investors. That gives Billions a second dubious milestone when it comes to the depiction of options on film. It’s undoubtedly the first time in recorded history, fiction or non-fiction, where switching from a traditional equity fund to an options-oriented fund has been described as having better “optics.” Perhaps Billions is onto something after all…?