Chapter 27: The Wolf of Wall Street (1)

I’ve been busy lately, making others work hard.

Creating a hedge fund on Wall Street isn’t easy. Fortunately, Ha Youngil, being an overseas-educated elite, is easy to work with.

“We should start with a boutique fund. I know a few friends; do you have any specific requirements?”

Ha Youngil’s eyes reflect anticipation, anxiety, and skepticism.

Of course, I’m still a child, even if I seem mature for my age.o

“If you have suitable friends, invite them. But keep it to three people or less.”

Boutique funds are small, often family-run, with a maximum of ten people.

More people create chaos.

…Usually, they’re small funds lacking the resources for more.

I nod, raising my index finger.

“And only one condition: loyalty. Not too sharp… ideally, somewhat naive.”

“Hmm, understood.”

Fortunately, regulations on hedge funds are lax. Small funds are exempt from many SEC registration requirements.

-Tap, tap.

I tap the table, outlining the next instructions.

“We won’t be raising funds domestically yet, so focus on offshore, not onshore. Bermuda? An offshore corporation solves most regulatory issues…”

Ha Jusung will handle the Japanese real estate. After laundering it through paper companies, it’ll be invested in the offshore fund for seed capital.

This is surprisingly the hardest part. Making money is easy; money laundering is hard.

That’s why I entrusted it to the experienced Ha Jusung.

“The fund’s structure will be an LLC, established in Delaware for tax benefits. This is well-known. You know that, right?”

US state laws differ; Delaware is generally the best for businesses, hence its popularity.

This basic information still surprises Ha Youngil.

“…I heard it from Father, but… amazing.”

Ha Youngil gapes in astonishment.

“Yes, I’m a genius.”

I smile, nodding.

“That’s not enough to explain this, Miss. Haa, this is truly…”

His eyes shine. A familiar look from Wall Street.

“This is exhilarating.”

“Right?”

That’s why I can’t quit this money game.

Once I’ve gained his trust, I switch to informal speech and begin giving detailed instructions.

Ha Youngil, now fully trusting me, uses professional terminology, engaging in a productive conversation.

“I’ll handle fundamental analysis and risk management; you just need to fill in the rest.”

“…Isn’t the direction mine?”

“We still need to create a facade. Presenting a genius’s intuition as analysis is challenging too.”

“Hmm, true. Regardless, ensure the accounting department is staffed with professionals.”

-Scritch scratch.

Lee Sihyeon, frowning deeply, furiously takes notes, diligently following my instructions.

“Our fund will primarily use long-short strategies. Short selling alone will only be for special occasions.”

Ha Youngil tilts his head.

“I thought you invested aggressively.”

“That’s fine with my own money, but credibility is vital for a fund. Investors dislike aggression. Yet, they want high returns; it’s ironic… but long-short strategies are simple, so there are many advantages.”

-Click.

I twirl my pen, considering my next instruction. I don’t fully know what he knows and doesn’t know…

I have a question, so I change the subject.

“So, have you worked in this field before? You’re surprisingly skilled… even learning from Jusung sir, it’s impressive for a college student…”

“Can you really compare me to you, Miss?”

He looks at me incredulously, clearing his throat.

“Actually, I always wanted to create a hedge fund. My father scolded me, so I gave up…”

“Hmm, a prepared talent. Welcome aboard.”

This guy is also a little crazy. Now is the ideal time to establish a hedge fund, but he would do so without backing?

An awkward silence ensues.

-Rustle rustle.

Only the sound of papers being shuffled fills the silence. Bored, I get up.

Tsk.

I get up to help Sihyeon, who is struggling.

“Sihyeon, any other questions?”

“…Can I ask?”

“Why? Ask now.”

Lee Sihyeon, slightly embarrassed, scratches her cheek before speaking hesitantly.

“So… what’s a hedge fund…?”

“Ahem.”

A chuckle comes from Ha Youngil. Sihyeon, blushing, tries to prove her intelligence.

“Ah, no, I, I know roughly. It’s a fund. Investing with other people’s money.”

Hmm, she didn’t disappoint.

Good secretaries make their superiors shine.

I write “Hedge Fund” on the paper with exaggerated politeness.

“Sihyeon-ah, read this.”

“I can read English! Hedge Fund. I, I went to a prestigious university…”

“But not Seoul National University. Compared to your Ivy League friends, you’re lacking, Sihyeon.”

I failed the entrance exam in my past life, but will pass in this one.

“Ugh…”

This is fun.

I chose my secretary well. I chose her for her looks, but she’s actually competent.

“So, Sihyeon, who can read English. What is ‘hedge’?”

“A fence, a protection… In finance, risk management.”

Yes, you’ve learned a lot.

Changing market positions is difficult. Buying the opposite position is called hedging.

Less profit on the upside, but smaller losses on the downside. Think insurance.

“But you haven’t learned more?”

“I learned about laundering money in Myeongdong… but I’ve had little time…”

…Field experience is important.

I clear my throat, starting a proper explanation. She must have worked hard.

“Betting on a stock’s rise is a long position; betting on a fall is a short position.”

Specifically, selling short is borrowing and selling, repaying later.

“…I know that.”

“Good. What happens if you take long and short positions in different stocks?”

“You take a long position in a rising stock and a short position in a falling one?”

“Specifically, shorting overvalued stocks.”

Lee Sihyeon ponders before answering.

“…Double the profit?”

That’s right.

That’s how they make money.

“Funds that do this are called hedge funds.”

“Wait a moment.”

Lee Sihyeon tilts her head, seemingly realizing something.

“But isn’t this unrelated to hedging? I learned that hedging involves taking opposite positions in the underlying asset and futures. Long and short positions in the same stock manage risk.”

That’s correct, normally.

“But you hedged, right?”

“…?”

“Hmm, I’m joking. This also manages risk.”

“Why? Different stocks double the risk.”

That’s what seems true, but the risk actually decreases.

Individual stocks move with the market. With market downturns, both stocks fall.

“Therefore, it manages risk.”

If I took only long positions, a downturn guarantees losses. But with short positions, I profit in that segment.

“The shorted stock is key. Overvalued stocks can fall even in a bull market.”

They fall even further in a bear market.

What if the shorted stock doesn’t fall? It means it’s a bull market, and my long positions will profit as well.

It’s a magical strategy that generates consistent returns, regardless of market direction. At least for now.

“It seems good, but something’s missing.”

“What?”

“You wouldn’t like this.”

Lee Sihyeon has unwavering faith in me—that I’m an extraordinary madman.

And she’s mostly right.

I shake my head, stating the obvious.

“Sihyeon, if the risk is halved… shouldn’t we double the leverage?”

She gapes, incredulous.

“…What? No, increasing leverage after hedging negates the hedge. Increasing the stake… that’s like a gambler doubling down…”

It’s ironic.

Modern hedge funds take immense risks, striving for high returns. They’re the epitome of high-risk, high-reward.

Therefore, hedging is irrelevant to the nature of hedge funds.

“It’s fine; I’m a genius.”

Heaven gave me future knowledge; if that’s not genius, I don’t know what is.

I smile, raising my hand. Like an actor on stage, I proclaim joyfully.

“High-risk, high-reward! Anything for profit! That’s the essence of modern hedge funds.”

Our difference…

I’ll only take the profit.