BEST BOOKS ON HEDGE FUNDS

PUBLISHED ON DEC. 19, 2019 | 13 MIN READ

Best Books on Hedge Funds

What are the best books on hedge funds?

Hedge funds are a growing personal financial portfolio for many people. However, the name hedge funds is simply a fancy name for an investment partnership. The partnership consists of a fund manager and investors who are known as limited partners, who throw their money in a pool of money. 

ou make. Be certain to gather all the data, information, and knowledge to make a consequential decision. Happy reading!

Best Books on Hedge Funds

THE LIST:

1. When Genius Failed
2. More Money Than God
3. When Prime Brokers Fail
4. The Hedge Fund Mirage
5. Absolute Returns
6. Guide To Hedge Funds
7. Investment Banks, Hedge Funds, and Private Equity
8. Hedge Fund Investing
9. Investment Strategies of Hedge Funds
10. What Hedge Funds Realy Do

1 – When Genius Failed | By Roger Lowenstein

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This gripping page-turner is like a financial action drama and is too good to be right. Writer, Roger Lowenstein has a talent for setting a tone instantly and captivating the behavior Wall Street and hubris’s herd reasoning developed collectively to generate a crisis. One that loomed a worldwide financial meltdown just like the Great Depression, or something that is even worst.  Lowenstein’s precise commentary reveals that few have evolved since the bloom of development Capital Management that is long term. When Genius Failed: The Rise and Fall of Long-Term Capital Management is a compelling cautionary story is ideal for financial professionals who do not want another Great Depression to occur. 

Quotes from the book;

“To John Meriwether and his traders, money management was less an ‘art’ requiring a series of judgments than it was a ‘science’ that could be precisely quantified.”

“The partners had assumed that other arbitrageurs would recognize the values they saw; their failure to step forward mystified them.”

“The professors spoke of opportunities as inefficiencies; in a perfectly efficient market, in which all prices were correct, no one would have anything to trade.”

“The Long-Term Capital Management episode proved…that the system of disclosure that has worked so well with regard to traditional securities has not been able to do the job with respect to derivative contracts.”

“Long-Term fooled itself into thinking it had diversified in substance when, in fact, it had done so only in form.”

2 – More Money Than God | By Sebastian Mallaby

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As hedge funds increase in volume, quality, and quantity, they also apply increasing influence on national governments, companies, industries, and central banks. Other hedge funds have succeeded tremendously, while some had disappointing results. Like those who during the U.S housing collapse had too many mortgage securities in 2007. However, with its chronicle, the hedge fund sector’s achievement has been outstanding. In this book, More Money Than God: Hedge Funds and the Making of a New Elite, Author Sebastian Mallaby who is a business journalist, vigorously demonstrates that hedge funds provide economic security by following the actual value of mispriced properties. His largely accurate book focuses on the achievements and rare failures of notable hedge fund managers such as Paul Tudor Jones II, Stanley Druckenmiller, George Soros, and Julian Robertson.

Quotes from the book; 

“Hedge funds are vehicles for loners and contrarians, for individualists whose ambitions are too big to fit into established financial institutions.”

“To an extent that was generally not realized at the time, hedge funds were changing monetary policy.”

“If ever irrational markets cried out for efficiency-enforcing arbitrage, the dot-com bubble surely was a clear example.”

“Hedge funds might have fallen less than the S&P 500, but customers expected them to be up in any kind of market, as though the magicians who ran them had abolished risk rather than merely managing it.”

“Quickly, [Paul Tudor] Jones emerged as a prodigy with a distinctive style. He approached trading as a game of psychology and high-speed bluff.”


3 – When Prime Brokers Fail | By J.S. Aikman

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J.S Aikman, who is a retired investment banker, authored this leading book When Prime Brokers Fail: The Unheeded Risk to Hedge Funds, Banks, and the Financial Industry, that explains in detail the sophisticated part of prime brokers in the worldwide financial market. It includes not commonly known knowledge to hedge fund managers, seasoned investors, and brokers about financing, research, security lending, tread execution, consulting, and trading. Alkman tells a story of the 2008 collapse of Lehman Brothers and how it had a domino effect on the world’s economy. Despite that, the role of brokerage when it comes to money management is still inevitable, hence why it requires high levels of scrutiny by experts. 

Quotes from the book;

“The intersection of the prime broker and hedge funds in international finance is a particularly opaque world.”

“From initial planning, fund formation and establishment, to capital raising, growth and ultimately termination, prime finance has a role in each step of a fund’s life cycle.”

“The primary goal of the hedge fund should be to match its internal needs with the external offering of the prime broker to operate effectively in the markets.”

“The flood of collateral leaving the investment banks effectively limited their financing options to only one, the Federal Reserve.”

“In the most fundamental relationship, the hedge fund stores its cash, financial instruments or securities with the prime broker as collateral.”


4 – The Hedge Fund Mirage | By Simon Lack

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According to Simon Lack, who is a hedge fund insider and a former JP Morgan top man, hedge funds are not secret capitals invested in foreign financial derivatives and instruments. Lack, who also authored this book, The Hedge Funds Mirage: The Illusion of Big Money and Why It’s Too Good to Be True, uses anecdotes and statistics to come up with a cautionary story to forward his dubious but straightforward theories: for most portfolios, hedge funds are not the smartest investment. He mentioned several success stories, including those of John Paulson and George Soros, but also equally highlight controversial figures and failures. This book may have its share of flaws, but the meaningful insights from Lack have duly compensated for that. 

Quotes from the book;

“Investors who can recognize what made the industry so successful – and acknowledge where their goals are inconsistent with what the industry can provide – will demand better terms, transparency, liquidity, fees and information.”

“An unfortunate feature of hedge funds is that, if you want to defraud people, a slightly mysterious trading strategy with an apparently strong history of performance in a limited partnership structure generally outside the regulatory framework is one of the best ways to do it.”

“Sadly though, for the industry as a whole, it appears that their investment acumen is not as keen as their commercial instincts.”

“Survivor bias is a well-known problem with reported returns…A fund can easily choose to stop reporting during a string of bad results.”

“Name a hedge fund client who has made a substantial amount of money by being a hedge fund investor.”


5 – Absolute Returns | By Alexander Ineichen

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In the 1990s, George Soros become a name that every household knew and hedge fund was then placed in the mainstream. However, his name was infamous in Europe. He was blamed for the downfall of the mechanism of the European exchange. Before, the hedge fund is hugely closed to a circle of a wealthy individual, but nowadays, it is more accepting of entry-level citizens. The writer of this book, Absolute Returns: The Risk and Opportunities of Hedge Fund Investing, Alexander M. Ineichen, is not someone who is selling an idea or warning us for possible adverse outcomes. Instead, he has written this book to dissolve misconceptions about them.

Quotes from the book;

“Irrespective of the history of hedge funds or whether hedge funds are leading or lagging the establishment, the pursuit of absolute returns is probably as old as civilization and trade itself. However, so is lemming-like trend following.”

“Risk control and capital preservation are among the main areas where the best hedge funds consistently excel.”

“Don’t lose money. If you don’t know the facts, don’t play. I just wait until there is money around the corner, and all I have to do is go over there and pick it up.”

“Either the convertible was too cheap or equity was too expensively valued by the market. To exploit this inefficiency, convertible arbitrageurs sold expensive equity and bought the comparably cheap convertible bonds.”

“Buy and sell decisions are based on expectations about future prices, and future prices, in turn, are contingent on present buy and sell decisions.”


6 – Guide to Hedge Funds | By Philip Coggan

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This concise textbook offers a compact, profoundly coherent introduction to the contentious topic of hedge funds. Philip Coggan uncovers these sophisticated, frequently deregulated investment channels. He distinguishes the main hedge-fund investment techniques, chronicles some of the most prominent hedge funds, and describes how they operate. He clarifies the more mysterious nooks of the hedge-fund sector, giving one of the most understandable descriptions yet composed of its uncertainties and regulative difficulties. This book Guide to Hedge Funds: What They Are, What They Do, Their Risks, Their Advantages is suggested to students who have a primary knowledge with the conception and language of finance, investment, and for those who are seeking an impartial and accurate book about hedge funds.

Quotes from the book; 

“Those…who run the funds have the power to bring down currencies, unseat company executives, send markets into meltdown and, in the process, accumulate vast amounts of wealth.”

“Academic studies come thick and fast but they seem to agree on one conclusion: Hedge funds do produce alpha [earnings in a down market]. The question is how much of that alpha is kept by the managers.”

“Traditionally, activists were seen as a force in the American market, but they have been moving their attention to Europe. This helps explain why they have been the subject of controversy; in continental Europe, shareholders have traditionally been seen.”

“The industry is gradually becoming mainstream. But this is still a weird and wonderful world, with lots of different creatures being dubbed hedge funds, even though they have strikingly different characteristics.”

“Hedge fund techniques are here for good, even if the industry itself changes out of all recognition – and 2007’s bad publicity will probably slow its growth.”


7 – Investment Banks, Hedge Funds, and Private Equity | By David Stowell

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As our marketplace emerges, investment banks, private equity groups, and hedge funds fight and contribute in various ways. Their modern modifications are detailed and explained by the 3rd release of David Stowell’s benchmark book, Investment Banks, Hedge Funds, and Private Equity, which supplements three different cases, critically revising of most sections, and renewed tables, number, and presentations. It catches the real trade that colleagues and presidents do, rendering readers with a model for actual transactions. Lastly, it gives more information with regards to how liquidity is being supplied in markets, a summary of high-frequency trading and electronic market making, cash equities, and quantitative trading techniques. 

Quotes from the book;

“Investment banking changed dramatically during the 20-year period preceding the global financial crisis that started ruing mid-2007, as market forces pushed banks from their traditional low-risk role of advising and intermediating to a position of taking a considerable risk for their own account and on behalf of clients.”

“Within the nine large global investment banks, Goldman Sachs and Morgan Stanley are examples of more narrowly focused investment banks.”

“Large investment banks have historically invested in private equity and hedge fund assets either directly or by coinvesting in a fund offered to clients.”

“Financial markets have become more integrated internationally, allowing corporations and governments more ways to raise capital by issuing securities outside their domestic markets.”


8 – Hedge Fund Investing | By Kevin Mirabile

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The 2nd  version of this book gives supplementary matters associated with how funds are sold, portfolio financing, the challenges faced, and liquid alternatives when trying to evaluate hedge fund management corporations. This release includes a modernized powerpoint presentation and a paired workbook that has a collection of end of chapter footnotes and an updated question bank of 150 test items.

This book Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance is a comprehensive design of alternative investments for both professionals and novices. Its structure is aligned with the CAIA curriculum that makes it a great resource book as a guide for hedge fund investments in the current financial weather. 

Quotes from the book;

“A newcomer to hedge fund investing can easily get overwhelmed by the complex terminology and unique characteristics associated with this type of investing.”

“Hedge fund investing includes investments in either private investment partnership, mutual funds or UCITS that trade stocks, bonds, commodities, or derivatives using leverage, short selling, and other techniques designed to enhance performance and reduce the volatility of traditional asset classes and investments.”

“Hedge funds use a wide range of legal entities and domiciles to gather assets from investors. Each entity is designed for a specific purpose and a specific type of investor.”

“A hedge fund is a specific type of alternative investment. It is a legal entity, not an asset class per se.”


9 – Investment Strategies of Hedge Funds | By Filippo Stefanini

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The hedge fund industry is one of the most significant growth sectors of investment; many of us have seen, which is considered by many individuals to be unique and has limited access for ordinary people. This book Investment Strategies of Hedge Funds presents an exhaustive learning encounter, explaining hedge funds, simplifying hedge fund approaches while allowing both quantitative and qualitative instruments that investors require to reach these kinds of funds. Materials do not only cover in focus the hedge funds but also the technical examination of several hedge fund strategies supported by trading models given by dominant hedge fund personalities. 

Quotes from the book;

“In the United States, the country where they first appeared and enjoyed the greatest development, there is no exact legal definition of the term “hedge fund” that outlines its operational footprint and gives a direct understanding of its meaning.”

“Back in 1949, Alfred Winslow Jones, a former reporter for Fortune, started the first hedge fund with an initial capital of only US$100,000.”

“The world of hedge funds borders with that of proprietary trading in investment banks.”

“Hedge Fund Research estimates that the number of hedge funds has gone from 610 in 1990 up to 7436 in 2004 (not including funds of hedge funds). Assets managed by hedge funds went from an estimated $38.9 billion in 1990 to approximately $973 billion in 2004.”

“Hedge funds are characterized by the use of alternative management styles or investment strategies, which is in fact what this book intends to analyze.”


10 – What Hedge Funds Really Do | By Philip Romero and Tucker Balch

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How does hedge fund indeed operate?  These less regulated funds continuously innovate new trading and investing methods to gain the advantage of shifting mispricing of assets. This mispricing occurs when there is a market price that is different from its real value. These methods have long been mind-boggling for many and are a well-guarded secret of the industry. This book, What Hedge Fund Really Do: An Introduction to Portfolio Management written by Balch, who is a computer scientist and a fund practioner, with the help of Romero, who is a finance academic and public policy economist, explains in detail the fundamentals of hedge fund practices It will help novices have a deeper understanding of what hedge fund is truly is.

Quotes from the book;

“Hedge funds are the least understood form of Wall Street institution-partly by design. They are secretive, clannish, and less visible. Hedge funds have received a generous share of envy when they are successful and demonization when financial markets have melted down.”

“Hedge funds are pools of money from “accredited”investors-relatively wealthy individuals and institutions assumed to have sufficient sophistication to protect their own interests.”

“From the industry’s beginnings in the mid-20th century, hedge funds grew at a relatively modest rate for the first quarter-century, only passing $100 billion in assets under management (AUM) in the early 1990s. But thereafter the industry grew rapidly, passion $500 billion around 2000, and $1 trillion around 2004.”

Final Thoughts

This article was an attempt to consolidate the best books on hedge funds. Obviously, the list is not an exhausted list of every book on the subject. However, the ‘best books on hedge funds’ list attempt to orchestrate different angles and degrees on hedge funds.

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Books Best Books on Hedge Funds – Summaries – Quotes