Victor Haghani

RWH071: Risk, Ruin, Reinvention & Resilience w/ Victor Haghani

- Victor Haghani's family background shaped his approach to risk: born in New York to an Iranian Jewish father and American opera singer mother, he experienced displacement during Iran's 1979 revolution, which instilled both resilience and deep respect for financial stability. - His early career at Salomon Brothers (1984–1993) on the government arbitrage desk exemplified sophisticated, multi-layered relative value trading that combined mathematical rigor with practical market access—trades that required deep knowledge of financing, futures, and over-the-counter options simultaneously. - Long-Term Capital Management (1994–1998) achieved exceptional early returns (31.2% annually for four years) through convergence trades, but the 1998 Russian default sparked a cascading crisis that wiped out 90% of the fund's capital, despite positions that Haghani defends as ex-ante defensible on a risk-adjusted basis. - The core lesson from LTCM's failure was not that position sizing was reckless, but that Haghani held an inappropriate concentration of *personal wealth* in the fund (80% of liquid net worth plus management equity and human capital), a mistake in portfolio allocation rather than trading strategy. - Expected utility theory—the principle that investors should maximize expected happiness (utility) rather than expected wealth, accounting for the declining marginal benefit of additional money—underpins all sound financial decision-making and risk management. - After a 10-year sabbatical (1999–2009), Haghani shifted from attempting a "David Swenson" model of hedge funds and private equity to index-based investing, realizing alternatives were tax-inefficient and fee-heavy for individual investors; he founded Elm Wealth in 2011 to manage assets with dynamic allocation based on risk and reward.