The Prince of Risk

8

“Septimus, a pleasure.”

A soft hand, white as snow, gripped Astor’s. “Bobby, so nice to see you. Though I wish it were under happier circumstances. Have you learned anything more?”

“Only what I hear on the television.”

“The police haven’t contacted you?” asked Reventlow. “Or is the Secret Service heading up things?”

“I wouldn’t know. No one’s called yet. My father and I weren’t close. I’m the last person who could help.”

“What a shame. Family is precious. When’s the last time you spoke?”

“Actually, he-” Astor began, only to cut himself off. His personal affairs were none of Reventlow’s business. “It’s been years. Like I said, we weren’t close.”

Astor showed Reventlow to a chair in the corner of his office. Astor flew fixed-wing aircraft as well as helicopters, and the room had a sleek aeronautical feel to it. Stainless steel surfaces, a titanium-colored carpet, even a vintage poster for Pan American Airways.

“Marv’s bringing in a printout of your portfolio,” began Astor. “He’ll go over the positions and show you where we stand.”

“That won’t be necessary,” said Reventlow. “I’d prefer to speak with you. My family has decided that we would like to increase our holdings in Comstock.”

“I heard that. I appreciate your vote of confidence. If I’m not mistaken, you have one hundred million in the Astor fund. Are you looking to invest in one of the others? Our quant fund is having a spectacular year.”

“Actually, we’d prefer to stay in the fund you manage personally.”

Septimus Reventlow was a reed of a man. He had sharp cheekbones and dark hooded eyes, and his thinning black hair was meticulously combed and swept off his forehead with a generous dollop of pomade. He was impeccably dressed in a black suit, a bold checked shirt, and a maroon tie that he had knotted loosely, almost casually. He wore his wealth like a birthright, the lord to the manor born, and it never failed to rub Astor the wrong way.

“The Astor fund?”

Reventlow nodded.

“That’s a tough one. We’ve closed that fund. We’re a hundred percent invested as it is. Not much we can do.”

“We were hoping to deposit three hundred million dollars.”

Astor smiled inwardly. Three hundred million dollars was big money. There was a time not so long ago when he would have begged, beaten, and killed for half that amount. “As I said, Septimus, we’re not taking any more investors in that particular fund. It’s nothing personal. There’s no way I can add to my position for the time being. It’s more administrative than anything else. I’d be happy to revisit the issue in a few months.”

Astor’s excuse was not entirely truthful. In fact the reason was personal. Reventlow’s was a little different from other family offices. The source of his money was always a bit hazy. Reventlow claimed it hailed from a German industrial dynasty dating to the era of Bismarck and the first kaiser. Astor knew about the Krupps, the Thyssens, and the German branch of the Rothschilds, but he’d never heard of a Reventlow, except for an obscure count who’d married Barbara Hutton, the heiress to the Woolworth fortune. And of course there was the question of the man’s looks. It was not that he didn’t look German so much as that he didn’t look anything. He was some kind of strange Eurasian mongrel.

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.”

“Exactly,” said Shank. “But blips never happen with the yuan.”

Astor didn’t answer. He was already moving across the trading floor. Shank was right. Blips never did happen with the yuan. Unlike other currencies, the yuan was not freely floating. The Chinese government maintained a strong hand on its daily ebb and flow. It was only recently that the government had allowed the currency to be traded by foreigners at all. The sudden move made him anxious. Maybe that’s what was causing his stomach to go haywire. Either way, he’d worry about the position later. Right now he had another priority.