The Little Book of Hedge Funds (Little Books. Big Profits) [Hardcover]

Anthony Scaramucci (Author)

Book Description

Publication Date: May 1, 2012 | Series: Little Books. Big Profits (Book 38)

The Little Book of Hedge Funds that's big on explanations even the casual investor can use

An accessible overview of hedge funds, from their historical origin, to their perceived effect on the global economy, to why individual investors should understand how they work, The Little Book of Hedge Funds is essential reading for anyone seeking the tools and information needed to invest in this lucrative yet mysterious world. Authored by wealth management expert Anthony Scaramucci, and providing a comprehensive overview of this shadowy corner of high finance, the book is written in a straightforward and entertaining style. Packed with introspective commentary, highly applicable advice, and engaging anecdotes, this Little Book:

• Explains why the future of hedge funds lies in their ability to provide greater transparency and access in order to attract investors currently put off because they do not understand how they work
• Shows that hedge funds have grown in both size and importance in the investment community and why individual investors need to be aware of their activities
• Demystifies hedge fund myths, by analyzing the infamous 2 and 20 performance fee and addressing claims that there is an increased risk in investing in hedge funds
• Explores a variety of financial instruments—including leverage, short selling and hedging—that hedge funds use to reduce risk, enhance returns, and minimize correlation with equity and bond markets

Written to provide novice investors, experienced financiers, and financial institutions with the tools and information needed to invest in hedge funds, this book is a must read for anyone with outstanding questions about this key part of the twenty-first century economy.

Editorial Reviews

Review

Most of the books I've read on investing are about as appealing as chewing on a cinder block. Fortunately, Anthony Scaramucci has written The Little Book of Hedge Funds, an entertaining and informative book without the typical Wall Street bombast, and it's nearly small enough to fit into my back pocket.

Scaramucci is a regular contributor to CNBC's Fast Money, so he knows how to deliver a cogent message when he explains "the history and evolution of hedge funds and how they operate." The Little Book of Hedge Funds has everything from interviews with industry giants (Leon Cooperman) to a Due Diligence Questionnaire for potential investors. This is not a book loaded with charts, spreadsheets and algorithms but rather a straightforward anecdotal piece with something for everyone. Whether you're a neophyte who wants to learn the basics, an investment guru who'd like to pick up some gossip -- or more importantly -- someone who is considering investing their savings with a money manager, this is a worthwhile read.

There are numerous comedy analogies throughout the book, and I found this one particularly amusing: "Mutual funds are Rodney Dangerfield, while hedge funds are Jon Stewart."

I'm not sure how accurate that is, but it kept me reading from cover to cover.

URL: http://www.huffingtonpost.com/rob-taub/book-review-the-little-bo_b_1443135.html

—The Huffington Post By Rob Taub Apr. 23, 2012

From the Inside Flap

Hedge funds. Everyone's talking about them, but what are they—really—and why should they matter to you? Presenting an accessible overview of these often discussed but rarely understood investment opportunities, The Little Book of Hedge Funds covers everything from their origins to their perceived effect on the global economy, and most important, why it's worth your while to understand how they work.

Essential reading for anyone looking to invest in this lucrative yet mysterious world, this book provides the tools and information guaranteed to illuminate the ways in which hedge funds have grown in both size and importance in the investment community. And why their future lies in their ability to provide greater transparency to those investors currently staying away because they don't understand how they work.

Written in a straightforward but entertaining style that makes getting a grip on the subject matter a breeze, this book examines hedge funds from all angles. Exploring everything from the financial techniques—including leverage, short selling, and hedging—that hedge fund managers use to reduce risk, enhance returns, and minimize correlation with equity and bond markets to the myriad investing strategies (including their strengths and weaknesses) that they employ, this book has you covered. And most important, it lays to rest the prevailing misconception that investing in hedge funds is somehow riskier than putting your money into other asset classes.

Filled with insightful commentary, actionable advice, and engaging anecdotes, The Little Book of Hedge Funds provides novice investors, experienced financiers, and financial institutions with the must-have tools and information needed to conquer the investment vehicle that everyone is talking about.

See all Editorial Reviews

Product Details

• Hardcover: 272 pages
• Publisher: Wiley; 1 edition (May 1, 2012)
• Language: English
• ISBN-10: 1118099672
• ISBN-13: 978-1118099674
• Product Dimensions: 5.4 x 0.9 x 7.3 inches
• Shipping Weight: 13.6 ounces (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (13 customer reviews)
• Amazon Best Sellers Rank: #173,939 in Books (See Top 100 in Books)

More About the Author

ANTHONY SCARAMUCCI is the Founder and Managing Partner of SkyBridge Capital, LLC, a New York-based alternative investment management company focused on partnering with emerging managers and seeding and mentoring Wall Street's next generation of entrepreneurs. Prior to founding SkyBridge, Mr. Scaramucci was a co-founder of Oscar Capital Management, which was sold to Neuberger Berman, LLC in 2001 after building a managed account business and four hedge funds having in aggregate more than $800 million of assets. Upon Neuberger Berman's sale to Lehman Brothers in 2003, he served as a Managing Director in their Investment Management Division. From 1989 to 1996, Mr. Scaramucci was at Goldman Sachs & Co., where in 1993 he became a Vice President in Private Wealth Management. He earned a BA in Economics from Tufts University in 1986 and graduated summa cum laude. He is a member of the Phi Beta Kappa society. He graduated with a J.D. from Harvard Law School in 1989. He is a Board Member of The Lymphoma Foundation and The Brain Tumor Foundation. Mr. Scaramucci is also on the Board of Overseers for the School of Arts and Sciences at Tufts University and a member of the NYC Financial Services Advisory Committee.

Most Helpful Customer Reviews

19 of 19 people found the following review helpful

2.0 out of 5 stars Another Book Review from the Aleph Blog June 30, 2012

By David Merkel

Format:Hardcover

I have worked for a hedge fund, and I have many friends that work for hedge funds. I understand hedge funds well.

The "Little Book" people at Wiley should indeed have done this book, but with a different author. Why? When there are significant areas of controversy around a topic, and you write a book as if there is no controversy, it means you haven't done your homework.

There are many like Simon Lack, who wrote "The Hedge Fund Mirage," and Dichev and Yu, who wrote "Higher risk, lower returns: What hedge fund investors really earn." (Note to readers at Amazon.com, if you read this at my blog, Alephblog.com, you get links to aid your learning.

Quoting from my review of Simon Lack's book:

"But, some of the problems with hedge funds, as a opposed to open-end mutual funds, is that:

1) Many hedge funds go out of business, and as they do, their bad performance is not recorded, and sometimes lost.

2) Hedge funds with good performance give the databases their early performance. Bad early performance does not get reported.

3) The activity of investors chasing trends is more pronounced in hedge funds than in mutual funds, with a loss of returns of 5% in hedge funds, versus 3% in mutual funds. This is all due to greater volatility.

4) Double alpha is generally not achievable, because most managers good at longs are not good at shorts, and vice-versa. Going long and short are different skill sets."

These are issues that the author of the "Little Book" does not address in any significant way. He mentions Simon Lack's book once in passing, but doesn't do anything substantive with it. He also does not deal with the difference between dollar-weighted and time-weighted returns. Because hedge funds are often quite volatile, investors buy at the wrong time (after a strong performance), and sell at the wrong time (after a weak performance). What that implies is that the average investor in a hedge fund typically does worse than a buy-and-hold investor.

Other Problems

Page 121 contains a math error in the first example on shorting. Yo! This is only arithmetic. Didn't anyone proofread the work?
Page 136 attempts to describe deal arbitrage, and makes what should be an easy concept rather turgid. It is so unclear, that I would have to assume the author does not understand what is a simple concept.
The book does not spend any significant time on how we live in a different world now than in the glory days of hedge fund outperformance. Even some slight commentary on the limits to arbitrage would have been useful.

Some Strengths

Much of the advice that the author gives in selecting hedge fund managers is sound, especially the list of red flags.
The "due diligence questionnaire" was also interesting.
Most of the descriptive material in the book was accurate, but there are other books and blog posts that provide that information, minus the hype.
This book is not mathematical, sometimes to a fault, where a chart or graph could have proven useful.

Summary

To be truly educated about hedge funds, you would need a lot more than this book. This book reads like you are being pitched on how great hedge funds are; it does not provide enough on the limitations of hedge funds, nor does it interact with the critiques of hedge funds.

Who would benefit from this book:

Most investors would not benefit from this book. Particularly those that advise institutional clients and high net worth individuals would not benefit. It is too optimistic about the performance of hedge funds.

9 of 10 people found the following review helpful

1.0 out of 5 stars Finalist for Worst Investment Book Ever Written July 27, 2012

By DudeMan

Format:Hardcover

It is difficult to express how bad this book is. Just to give you a flavor:

*several porn related references throughout
*insipid "interviews" with hedge fund managers that contain one or two line answers
*Warren Buffett is a hypocrite comment
*apparently this author doesn't believe Madoff ran a Ponzi scheme - how else do you read a weird comment like this (page 8 - "he was running a separate account business that made tons of money...)"
*investment nuggets like "hedge funds are not a panacea for all the world's ills"
*lots of plugs for SkyBridge Capital

Horrible, just horrible.

1 of 2 people found the following review helpful

3.0 out of 5 stars Buyer be skeptical December 9, 2012

By T. Kepler

Format:Hardcover

An entertaining read to fulfill a personal goal of reading at least one finance or investing-related book each year. The book helps to de-mystify the hedge fund industry. Not clear to me how folks in an industry that doesn't actually make or innovate anything can get exorbitantly wealthy in short order. If more intelligent and motivated individuals aimed to be hedge fund gurus, who then would be our engineers, neurosurgeons, teachers, musicians, etc.? The cautionary note caveat emptor should apply exponentially to any industry that relies on leverage or borrowing money beyond reason and common sense to reach so-called alpha. With a modicum of due diligence, the individual investor could apply some of the book's advice, e.g., diversifying holdings across asset classes to reduce risk, and increase the possibility of success and decrease an adverse outcome or substantial loss in the market. Chapter 10, "From Wall Street to Park Avenue" is a primer on aspiring acolytes to the field, and some of the "15 Things" are noteworthy for their ideals, yet I would hardly equate with the money management crowd. And one of the best lines in the book..."make sure you do non-linear nice things for people - with no quid pro quo expected." Does this include reducing the management fee?