FORTUNE — The view from Barsky Ventures is opulent: Midtown Manhattan from 57 stories up, eye to eye with the city’s penthouse apartments and executive suites. The office itself, however, is spartan. A few sticks of generic office furniture dot a sea of rough beige carpeting, giving the place the look and feel of a no-frills tax preparer’s waiting room. It’s quiet as a library. The only thing in the place at all flashy is a movie poster as tall as an 8-year-old, bearing, in big red letters, KOCH. THE MAN. THE MAYOR. THE MOVIE. Underneath is the world-weary face of the former New York mayor. This is where Neil Barsky works. Koch is his movie. Before he made his film, Barsky ran a successful hedge fund. But that’s all over. All that’s left is the movie. That’s all Barsky is doing. That’s all he wants to talk about — his film, Koch, all the time.
Koch was released months ago, and promoting the film is Barsky’s full-time job. In the midst of talking up the DVD’s extras, he stops to grab a stack of Koch postcards and slips them into my hands. “Here,” he says. “Just in case. You never know.”
Barsky may have been a hedge fund guy, but he is not “The Wall Streeter Goes Hollywood.” That is, he’s not financing films and then parlaying his production credit into trips to Cannes or Sundance or Tribeca and handshakes with Clooney or drinks with Tarrantino. First of all, Barsky — who is 55 — didn’t just finance Koch. It was his idea. He put together a crew. He directed the thing. He also conducted much of the research and all of the interviews. He learned, often painfully, how to do everything, even obtain music rights. Second, he made a documentary. About an octogenarian politician. And about a dying city. It’s a deeply unsexy movie. And Barsky loves it.
Barsky defied expectations when he made Koch, but his career arc is generally hard to define. He started as a newsman, working the business desk at the New York Daily News in 1986. He moved to the Wall Street Journal in 1988, where he covered real estate and the gambling industry. In 1993 he became an analyst at Morgan Stanley. Five years later he co-founded a hedge fund. Then he went solo in 2002 with Alson Capital Partners — named for his children Alexandra and Davidson. At its height, Alson had $3.5 billion in assets under management.
Wall Street was very good to Barsky, but he still talks about journalism like the one that got away. “I loved getting up in the morning, looking in the mirror, and saying, ‘I’m a reporter.’ I took no great joy in saying, ‘I’m an analyst’ or ‘I’m a hedge fund manager.’ I was reluctant to leave my identity as a journalist. I loved journalism for the excitement of discovery. I loved getting exposure very quickly to so many different things. I still consider it to be among the highest callings. I really do.”
What Barsky most likes about reporting, it seems, is that he gets to be the one asking the questions. He peppers me with: “Do you know what you’re going to say? What’s your angle here? What do you think this will be about?” When I ask him what story he would tell, he says, “Wow! This guy doesn’t know fuck-all about documentaries, and he did this great movie about Ed Koch! Koch is a great movie! Everyone should see it!”
Barsky, like Koch, was born in the Bronx. Barsky briefly left the city, moving to Long Island and then New Jersey before returning to Manhattan in 1973 as a high school sophomore. That was four years before Koch ran for mayor. The city wasn’t just broke — it was depressed. “Terrible things were happening,” Barsky says. “But for an intellectually curious teenager there was magic in moving to the city.”
While a junior at the Walden School, Barsky and three classmates went to Boston to make a short movie about the busing crisis over school integration. A federal judge had ruled that students from white areas of the city would be bused to black areas to attend high school, and vice versa. The law was intended to remedy discrimination in Boston’s public schools, but it sparked riots and protests, particularly in the neighborhoods most affected by the ruling. Barsky and his friends wanted to figure out what was really going on, so they interviewed teachers, local politicians, and other students. “The great stuff in the movie happened when we interviewed other kids,” he says. Barsky heard a lot of raw bigotry, but also very honest statements about why people felt their way of life was being threatened. “There was a clannishness, but also a sense of community.”
The Boston trip fed Barsky’s enthusiasm for two things: reporting and politics. Neither interest has waned. While at the Journal he played poker at the Players, a club in a townhouse on Gramercy Park founded by Mark Twain, Gen. William Tecumseh Sherman, and the actor Edwin Booth (brother to John Wilkes). Barsky’s friend, the literary agent Chris Calhoun, recalls he sometimes forgot to take off his work ID badge and would play with it draped across his chest. (Barsky insists that he would never have done so on purpose.) As a player, Calhoun says that Barsky “was constantly raising to get rid of the watchers. When he played a hand, he was committed to winning it. That’s the kind of guy you want to play with.” Barsky often won.
At the age of 35, Barsky faced what he calls a mid-career crisis. He had a family and was fully ensconced in New York City. His dreams, like working as a foreign correspondent, didn’t make sense anymore. He left the Journal and began covering commercial real estate and the gaming industry for Morgan Stanley. Within a year he was ranked one of Institutional Investor’s All-Star Analysts. In 1998 he started a hedge fund with fellow Morgan Stanley alum Scott Sipprelle called Midtown Research, which grew to over $1 billion in assets under management. The two parted ways when Barsky wanted to open his own fund in 2002.
“Neil’s taken risks I would have judged to be foolish, and he’s succeeded at all of them,” says Nick Goldberg, the editor of the Los Angeles Times’ editorial pages and a friend since high school. When they were teenagers, Goldberg recalls a time when he and Barsky bought beer and resold it to concert-goers in Central Park. “He’s always had an entrepreneurial spirit,” Goldberg says.
Barsky is slouchy. He is folded into his chair, jacket scrunched up around his armpits, golf shirt askew. “I failed at everything I ever tried,” he says. “I graduated from Oberlin and couldn’t get a job in journalism. I went to Columbia Journalism School, and it took me a while to get my momentum. When I wanted to start my first hedge fund, it took a while to raise money. This documentary took two years. You know those Harvard Crimson guys who at 22 go to the New York Times and never look back? That’s not me.” Then he adds, “But I guess that’s not a bad thing.”
Barsky’s friends sigh when I ask about this string of perceived failures. “It’s in his own mind,” says Josh Quittner, a former journalist (who worked at Fortune) and current editorial director of Flipboard, the news and social media mobile platform. Quittner is right: Few people get journalism jobs right of school; most first-time money managers raise capital slowly; documentary films take years to make. “Barsky second-guesses himself to a degree that makes a normal neurotic New Yorker seem relaxed,” Quittner says. “Maybe all the self-flagellating is what makes him a very good executor.”
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At his fund, Alson, Barsky was a value investor, the same strategy employed by Warren Buffett. Value investors figure out why a company’s worth is not reflected in its stock price. It’s a process of understanding how something fits in with the rest of the world, revealing the truth that everyone else has missed. “Neil was early in predicting how popular [Atkins] would be,” says Jordan Grayson, founder of Outpoint Capital and a founding member of the Alson investment team. Barsky shorted Panera Bread (PNRA) and Krispy Kreme (KKD) in the mid-2000s, and the firm made money. In 2004 and 2005, Barsky liked homebuilders. In 2007 he was short subprime lenders, REITs, and low-end realtors. Again, the firm made money.
Over the course of his entire career as an investor, from August 1998 to March 2009, Barsky made on average 12.1% a year. The S&P (SPX) lost about 30% over the same period. In Alson’s only losing year it fell 24% amid the chaos of the financial crisis in 2008. Assets shrank to about $1.5 billion. Barsky decided to close the firm in April 2009. “There is no way to sugarcoat the reality that [bottom-up stock picking] has not been profitable of late, and there are few signs on the horizon that such skills will be rewarded soon,” he wrote in a letter to investors.
Soleil Nathwani, Alson’s former chief operating officer, says that Barsky’s biggest concern was putting his people out of work. “Everyone in that company, even the receptionist, had equity,” says Nathwani. “He gave six-month severance packages and covered everyone’s health care until they found new jobs. During my eight years at Goldman Sachs, where I had worked with hedge fund clients, I had never seen a firm run like that.”
After Alson closed, Barsky searched for a way back into journalism, knowing full well that the traditional, advertising-based business model was deeply flawed. “Neil has an understandable, and I think on target, sense that the first best solution would be market-based,” says Richard Tofel, the president of ProPublica, a nonprofit investigative-journalism publication. “But he has a good sense for the limits of market-based solutions, especially when it comes to deep investigative reporting.”
Barsky has been trying to figure out how to create great reporting in a bad business environment. He now serves as chairman of the board of overseers of the Columbia Journalism Review, and according to CJR’s chairman, Victor Navasky, he has encouraged the organization to play a significant role in coming up with new business models for journalism. As a board member of Youth Communications — a nonprofit that teaches marginalized teens to write and publish stories about their lives — Barsky pushes leaders to think about which projects will financially sustain the organization. “We’re in the process of rethinking our strategy largely thanks to Neil,” says Keith Hefner, the founder of Youth Communications. “I sense an urgency in him to change things.”
Barsky liked that documentaries were becoming as influential, if not more so, than print media.
Waiting for Superman
had launched a national debate about charter schools;
did the same, only about fracking. When done well, he says, documentaries aren’t polemics, which is why the films of Errol Morris are among his favorites. Morris’s films ask viewers to make up their own minds. Barsky sought advice from his high school friend Matt Penn, a director and producer best known for his work on the show Law & Order. “He is always looking for a way to fulfill his ambition. I urged him to make a documentary,” says Penn.
It’s noon and Barsky is at a screening of Koch at the Central Queens Young Men’s & Young Women’s Hebrew Association. The room is packed with senior citizens, and the glow off the projector illuminates clouds of permed hair and a sea of oversize glasses. At times the din of the crowd overtakes the movie soundtrack: waves of cheers, clucks, laughs. “He’ll always be the mayor!” a viewer shouts. Only one scene silences the gallery. Koch is holding court at a high-octane election-night party. Fellow Democrats Andrew Cuomo and Kirsten Gillibrand, who have won their races, glide among the guests as the celebration reaches a fever pitch. Having said his congratulations and shaken some hands, the former mayor leaves, and the camera follows him into his car, to his apartment building, down a long hallway, and to his front door. He turns the key and disappears inside, into his empty apartment. An interior lock slides shut. Click. A hollow echo.
Barsky toyed with lots of potential documentary subjects, including the artist Mark Rothko, before settling on Koch. During the Q&A, he tells the audience that his thoughts turned to Koch about eight years ago, when his daughter said she wanted to be a social worker. They drove through the South Bronx, which had been rocked by riots and fires in the 1970s and abandoned by the middle class, to see how people “really lived.” When Barsky was in high school, the area looked like Dresden after World War II. But when father and daughter drove through the neighborhood they found high-rises and thriving neighborhood businesses. “The movie tries to answer the question of how this transformation happened,” Barsky says. “Even though I felt Koch was a highly flawed mayor, he was the first politician who realized intuitively, though he never articulated this, that you had to shore up the city’s economy before you could use government to do magnificent things.”
Koch is a largely affectionate film, but it’s also the tale of a city where discrimination exacerbated the housing crisis, crime, and the HIV/AIDS epidemic. A short film called Witnesses NYC, to be included on the Koch DVD, comes from interviews Barsky conducted with a variety of city residents who lived through the Koch years, including a graffiti artist, a peepshow worker, and a crack dealer. For all the different sides of Ed Koch we see — comedian, economic visionary, cold-hearted pragmatist — you leave the film believing there is still an essential Koch, a man who left it all on the field to be the mayor of New York City. It’s a distillation of the worldview Barsky has brought to journalism, research, and investing. A person, an idea, a company, is not simply good or bad, but everything in between — the trick is seeing the essence, the truth, the value at the center of the thing.
Koch ends, the lights go up, and Barsky walks to the front of the room to take questions from the audience. It’s a wonderful film, one woman says, but how will Barsky get the young people to watch? A chorus rises. What, they demand, is Barsky doing to get the word out? “Maybe you could show the movie at universities or high schools,” suggests a woman with a nimbus of white hair. “Or libraries,” someone chimes in. “I watch PBS,” says a bottle-brunette in a red sweater vest, “But isn’t HBO more popular?” Barsky’s movie is doing just fine — serendipitously hitting theaters on Feb. 1, 2013, the very day that Koch died. (“Leave it to Ed to exit the stage just in time to maximize interest and ticket sales,” Mike Bloomberg said that morning.) It’s played at 114 theaters in 100 states, and been reviewed by the New York Times, Entertainment Weekly, and the Washington Post. Seated high above the streets of Manhattan, Barsky is a former ace reporter and wealthy investor. Here in Queens, he’s a first-time filmmaker who is proud of the turnout at this community center. Barsky waits for the kibbitzing to play itself out. He rubs his hand over his hair. He peers over his narrow glasses. “It’s true,” he says. “These are all worthy options.”