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On The Dizzying Rise And Shattering Fall Of Dan Zwirn
For anyone who traded in the 2003-2007 interval (second liens what else - did anything else even trade in that period), the name DB Zwirn was synonymous with hedge fund perfection. In fact, the only name that stood above it was that of Phil Falcone's hedge fund Harbinger. Gradually, both of these high fliers were replaced in the awestruck trader lexicon with another "legendary" hedge fund, that of Paulson & Co. But for a brief period the Zwirn offce at 745 Fifth is where every fixed income trader wanted to reside. Yet as always happens, anything that is too good to be true, isn't. Below is William Cohan, who in a way that only he can, spins the tale of the the rapid rise and even more rapid fall of the hedge fund manager who had it all by his thirties, only to lose it (mostly) all shortly thereafter.
Dan Zwirn’s Hedge-Fund Fall Is a Horror Story of Doing Right, by William Cohan
On the lengthy list of things Dan Zwirn has lost, a few items jump out. There's the $17 million condo on Central Park South, the summer place in Quogue, N.Y., and the $18 million Gulfstream IV jet. Then there's D.B. Zwirn & Co., the hedge fund that once managed $12 billion in assets, employed 275 people in 14 global offices, and created the roughly $700 million in personal wealth that made so many of Zwirn's spectacular purchases possible. Zwirn, 40, misses his money and the things it afforded him. But what he misses most, he said, is his "beautiful machine."
That's Zwirn's term of endearment for his now-defunct hedge fund. The beautiful thing about it was its discipline. D.B. Zwirn abstained from the directional or leveraged bets that other hedge funds make. Instead the firm provided capital to about a thousand companies with few other financing options -- companies such as a small New York-based Spanish-language radio group and a company that leased slot machines to casinos on Indian reservations. The one and only strategy was to learn everything about the prospective borrowers, figure their odds of repayment, crank up the interest rate to the proper pain point, and grind out 1 percent a month in profits.
For 49 straight months, Zwirn, who aspired to be the hedge fund world's scrappy singles hitter, got paid like a home run champ. The D.B. Zwirn Special Opportunities Fund had gross returns of 21.8 percent in 2003, 21.6 percent in 2004, 18.9 percent in 2005, 24 percent in 2006, and 16 percent in 2007. As machines go, Zwirn's was a Ferrari.
Kafkaesque Fight
Seated behind the desk in his personal office in midtown Manhattan, Zwirn, who's built with the compact force of a small linebacker, reaches for what have become the most prized possessions of his new life: two Lucite tombstones. They could be from any number of deals he did in his early career as an investment banker and private equity investor. Instead, each contains a replica of a letter from the Securities and Exchange Commission. The first, dated Feb. 23, 2011, absolves Zwirn -- after a four-year investigation -- of any personal blame for the implosion of his firm. The second, dated April 7, 2011, clears D.B. Zwirn of any wrongdoing. This past summer, Zwirn settled most of the outstanding civil litigation against him. "For the first time in five years, I have not been thinking of catastrophic personal downside," he says, managing a faint smile.
After a Kafkaesque fight with his firm's auditors, PricewaterhouseCoopers, and the SEC, Zwirn said the tombstones give him hard-won proof of his innocence. What the letters can't restore are his firm or the roughly 98.6 percent of his fortune that vanished over the past five years. They also don't say that he's without his share of responsibility.
Gulfstream Loan
In April 2005, Zwirn decided he needed a Gulfstream IV. He was 33 and the boss of a rapidly growing global financial behemoth. He didn't ask anyone's permission. He just gave the order, and it fell to Harold Kahn, the fund's chief operating officer, to arrange the financing.
Merrill Lynch agreed to provide 90 percent of the $18 million purchase price on a non-recourse basis and required only a $1.9 million letter of credit from Zwirn's management company to close the deal. Citibank initially agreed to provide the letter of credit; after a series of delays in obtaining the Citi loan, Zwirn still needed $3.8 million in September 2005 (including cash collateral) to meet what Merrill required to get the jet. For a firm the size of D.B. Zwirn, it was a tiny sum. Zwirn could have just written a check, but that's not particularly creative or cost-effective for a specialist in the art of using other people's money. In any event, Zwirn says he was not aware that difficulties had emerged in getting the final piece of financing.
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agreed. never heard of the guy.
but a Gulfstream jet costs $18 Million?! -- *gulp* -- guess I better take that off of my wish list ...
I wish more people new about the ESF and the ISDA.
Gulfstream V - 1/72 scale model
http://amzn.com/B000U8612I
GV is soooo last decade. Either pony up for the G650 or go home.
Shouldn't it be "Anything that is to good to be true IS" Instead of anything that is to good to be true isn't? Either way, printing money to fix the economy is to good to be true
I would probably use "too" instead of "to," but that is just me.
Ex-Lazard Banker (Zwirn) being interviewed by another ex-Lazard banker (Cohan).
Of the two, Cohan is the greater self-inflated d-bag - he thinks he's better than Zwirn, just never had the moxie and intelligence to pull it off.
Dan Zwirn, despite his DBZ issues, was a very, very good banker.
Cry me a river..................
Loser
Just another "tale Told by an idiot, full of sound and fury,
Signifying nothing."
Who could read it, boring!
Kafkaesque:
http://www.imdb.com/title/tt1615558/
http://www.tv-links.eu/tv-shows/Breaking-Bad_135/season_3/episode_9/video-results/
Zwirn still thinks he's the smartest guy in the room.... Throwing Gruss under the bus may be deserved, but Zwirn knew more than he lets on now- a control freak like Zwirn doesn't leave this many details blindly to subordinates......
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Not surprisingly, Zwirn would also like to get back behind the wheel. He recently returned from visiting potential investors in London, flying business class on a commercial jet. "The macro environment for what I know how to do is exceptional and has prospects of being so for quite a long time," he said. "I got a lot of clarity from this process. It's what I am actually doing for 15 hours in a day that's important. And so there's lots of forms that could take as long as I'm able to do something that has the levers and buttons and control panel on it."
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The macro environment for what I know how to do is exceptional and has prospects of being so for quite a long time,
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I HOPE THIS IDIOT WILL STAY OUT OF MARKETS FOR HIS OWN GOOD ..
after such reading i always recollect immortal dialog from 'wall-street movie'
Bud: How much is enough, Gordon? When does it all end, huh? How many yachts can you water-ski behind? How much is enough, huh?
Gekko: It's not a question of enough, pal. It's a Zero Sum game – somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred – from one perception to another. Like magic. This painting here? I bought it ten years ago for sixty thousand dollars. I could sell it today for six hundred. The illusion has become real, and the more real it becomes, the more desperately they want it. Capitalism at its finest.
Bud: How much is enough, Gordon?
Gekko: The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons – and what I do, stock and real estate speculation. It's bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now, you're not naive enough to think we're living in a democracy, are you, buddy? It's the free market. And you're a part of it. You've got that killer instinct. Stick around, pal, I've still got a lot to teach you.
http://en.wikiquote.org/wiki/Wall_Street_(film)
alx
This too. "Zwirn, who's built with the compact force of a small linebacker..."
It's always the Lolipop Guild that stirs up shit. Small Man Complex. Hitler had it. Stalin had it. That monchichi looking little fucker in Iran has it. Napoleon. Somebody stop me.
What is it with small guys, all the way back to Rumplestiltskin, fucking up other peoples lives?
"You and I have a tendency towards corpulence. Corpulence makes a man reasonable, pleasant and phlegmatic. Have you noticed the nastiest of tyrants are invariably thin ?"
-- Charles Laughton, "Sempronius Gracchus."
"Spartacus," 1960.
A $700 million personal fortune, and he let it all get away? Did he not have enough of a danger instinct to consider saving 10% of it?
Very difficult to sympathize with imprudence and foolish spending habits on the part of someone whose very instincts should be to know better.
That's a lot of trips to the coin shop & ammo dealer... No wonder he needed a Gulfstream...
Pissing and moaning just because he couldn't figure out how to hang onto most if not all of his 700MM? Tchah. The guy's a pussy next to Jesse Livermore. WTF is it with the (temporary) BSD Masters of the Universe? Surely they saw shit like this while they were clawing their way up the ladder; surely they saw the guys who'd lost their cookies didn't just suddenly get stupid - they just lost their mojo.
Maybe I'm full of it. Hell, am still trying to find 2 silver quarters to scrape together. But I *gotta* believe that once I'd made a tidy little pile - say $10 mil - that I'd take 10% and pop in into an ironclad untouchable trust, and add another 10-15% to it every now and then. Nothing lasts forever. Sooner or later, the top-secret algorithm becomes moot; the magic spells stop working; you find you can't catch up to the high heat anymore. And when its gone, you ain't getting it back, Jesse Livermore notwithstanding.
Ask Tiki Barber. Ask Randy Moss. Manny Ramirez. Evander Holyfield. All the real-estate millionaires in Vegas & Phoenix & Ft. Lauderdale in 2006. Ask that Zwirn guy nobody ever heard of. It ain't what you make - it's what you keep.
That was brilliant. I have seen it come and go. As I get older, I want some of it to stay. Being fabulously wealthy is great. Being broke utterly sucks. It's worse than that, it is actually life-draining.
What Gekko said in Wall Street was so true. It's perception. It's how we keep score. I choose Gold these days. Getting your hands on it for anything less than a 10% uplift on current price is almost impossible. Perception.
I also choose to bury it. A little in lots o' places. Perception.
"It ain't about the money, honey. Money's just the way we keep score." JR in Dallas, my father-in-laws' (gone now) favorite quote...
Actually, I think that was an Oscar Wyatt quote...and many people think that the JR charcter was modelled after him.
Thanks to Penn and Teller, I can only see this story as an exploitation of patterns to prevent readers from thinking critically (laugh) via this irrelevant distraction. Remember, nothing encourages foolishness more than the acceptance of lying to yourself.
This story is a planted pile of steaming propaganda pulling on heart strings to get (someone) to care that a guy went from chaps to riches to pressed suits. Talk about a coming out story planting the seed for a new, poistive narrative.
You NAILED it.
DBZ lost his hundreds of millions? Sheesh, at least DB Cooper had enough sense to take his cash and jump out of a plane. hehe.