As the holiday of Purim approaches, IcebergCarwash is pleased to bring you a somewhat modernized version of the Purim story, presented in seven installments, the first of which is presented in this post, with subsequent installments presented consecutively below:
And it was in the days of Ahasueres, a mighty king, whose dominion covered nearly all of the inhabited world, and who possessed an investment portfolio to match. After one particularly profitable year, during which the king’s portfolio handily beat all of its benchmarks, he made a lavish holiday party for all of his portfolio managers, traders, analysts, and the entire back office staff. He invited representatives of the regulatory agencies as well, just to stay in their good graces. For a period of 180 days, spanning the entire football season, and the majority of the baseball, basketball and hockey seasons, the king entertained party goers with his unparalleled collection of season tickets. The VIPs were granted access to the king’s luxury suites at these events. Needless to say, the alcohol flowed ceaselessly for the entirety of the 180 day party. Sure, it was highway robbery to charge $10 for a cup of watered down stadium swill, but with the king picking up the tab, who really cared? Attendees drank to their heart’s content, and the king’s popularity ratings hit an all-time high.
Unfortunately, the king’s wife, Queen Vashti, was not impressed by his investment returns. For one thing, the king had merely served as an investor. The actual decision-making was made by his vast army of money managers. The king had not made a single buy or sell decision all year. If anything, Queen Vashti had been much more directly involved than her husband in choosing the money managers. Why, the king had not even made an overall asset allocation decision for the portfolio! Queen Vashti doubted that he even knew how to use the asset allocation software that one of his people had developed.
Flush with the success of his portfolio, the king became a sought-after “expert” on investment matters. He was a frequent guest on financial TV and radio shows. As the 180-day party was winding down, he decided to host an investor conference for finance professionals located in the capital city of Shushan. The king himself would serve as the keynote speaker at this conference, dispensing his sage advice.
The investor conference was well-attended, probably more for the free food, wine and giveaways than for the pearls of wisdom the attendees would glean from the various speakers. As the king’s keynote address approached, he decided to put together a panel discussion for the Q&A session which would follow his speech. Naturally, he asked Queen Vashti to chair the panel. She was a knowledgeable panelist, and her inclusion in the proceedings would allow the king to show off his wife’s admirable financial acumen.
When she learned of the king’s request, Queen Vashti was incensed. “A panelist, is that all I’m good for?” she fumed. “He won’t even allow me to give a presentation? When I met him, his "investment research" involved hanging out at the racetrack, looking for tips, and now he's an expert?” Queen Vashti flatly refused the king’s request, going so far as to sign up as an attendee at a small-cap biotechnology stock conference, held at a small, out-of-the-way facility. To ensure that she would be unavailable for the king’s conference, she arrived at her conference a day early, which allowed her to participate in the pre-conference festivities, such as the “best ball” golf tournament. Her team finished fourth, which was considered a decent showing.
Upon hearing that Queen Vashti would not be attending his conference, much less chairing a panel discussion, the king became enraged (although he did seem mildly impressed by her team’s fourth-place finish in the “best ball” tournament). He gathered his seven closest financial advisors, and asked them what to do.
Now, most of these advisors were “low beta” types, who hated to take risks, financial or political. These guys didn’t look for alpha, they hid from it. Not surprisingly, they didn’t really have any solid suggestions for the king. One manager, though, a fellow by the name of Memukan, was more than happy to chime in. Memukan had a real bone to pick with the Queen. The Queen was no saint, and Memukan knew it. As the key decision-maker for the king when it came to choosing specific money managers to invest the king’s money, she had been running a pay-for-play scam for years. Even that particular process was not even-handed. Despite the fact that his firm had paid a substantial amount of graft to the Queen, they had never been entrusted with more than a token amount of the king’s assets. Memukan was determined to receive a substantially larger allocation for his fund, and the dramatically increased fees and prestige that would result, and now he had his chance.
“Your Highness should immediately remove Queen Vashti from her position on the king’s Investment Committee,” stated Memukan. “In fact, I recommend that she lose her license entirely, and be permanently barred from the investment industry in each of the 127 countries over which Your Highness so splendidly rules.”
Memukan’s words resonated with the fuming king. Who did Vashti think she was, anyway? He was the king, so it was his portfolio they were managing, not hers. And, if he wanted to put together a conference, it was her duty to not only attend, but to also participate in the manner which he requested. Besides, despite her obvious talents as a portfolio manager, Vashti had proven completely incapable of managing tail risk. Memukan’s recommendation was invoked, and the Queen was thusly banished forever. For good measure, the king implemented a decree, which stated that from that day forward, in matters pertaining to the investment of household funds, men would have the final say over their wives, in the event of a dispute.
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