Managing a Hedge Fund: A Complete Guide to Trading, Business Strategies, Risk Management, and Regulations [Hardcover]

Keith Black (Author)

Book Description

Publication Date: June 25, 2004

Hedge funds now account for 25 percent of all NYSE trading volume and are one of the fastest growing sectors in today’s financial industry. Managing a Hedge Fund examines every significant issue facing a hedge fund manager, from management of numerous types of risk to due diligence requirements, use of arbitrage and other exotic activities, and more. Broad-based where most hedge fund books are narrowly focused, it provides current and potential managers with a concise but comprehensive treatment on managing—and maximizing—a hedge fund in today’s fiercely competitive investing arena.

Editorial Reviews

From the Author

This project started as class notes for the Hedge Funds course in the MS Financial Markets program in the Stuart Graduate School of Business at the Illinois Institute of Technology. When this course was first taught in the fall of 2002, I could not find one book that covered all of the topics necessary to teach a comprehensive graduate course on Hedge Funds. This book is an attempt to summarize research from all areas of the industry, allowing readers a one-stop access to hedge fund information.

Therefore, it is my hope that more MBA and MS programs will start teaching courses on hedge funds, and that this book will be very helpful in their teaching process. This book is written at an intermediate level, presuming prior knowledge of options and futures markets as well as Markowitz style investment theory.

Professionals from all areas of the alternative investment arena may also find this project to be helpful. Regulators, brokers and bankers may have advanced knowledge of standard financial products, but have been unable to keep up with the phenomenal growth of the opaque hedge funds industry.

Perhaps the most important audience could be those who currently manage, or aspire to manage, hedge funds or funds of hedge funds. Hedge fund managers may find new ways of analyzing the risk and reward of their trades, or be able to offer new funds in another style area. Funds of funds managers need to understand all styles of trading, and it is hoped that this book will allow these managers to become fluent in all strategies.

Finally, this project hopes to demystify hedge funds for investors. Hedge funds should be seen as a way to diversify a portfolio, reducing risks and offering investors returns that can offset losses in their traditional investment portfolio. Investors should learn the reasons for the lack of transparency for hedge funds, and that hedge funds don’t have to be seen as an inherently risky investment style.

From the Inside Flap

Hedge funds have emerged from the shadows of Wall Street to become one of today's fastest-growing investment classes, accounting for twenty-five percent of trading volume on the NYSE. But the rules and regulations for their operation often remain shrouded in mystery.

Managing a Hedge Fund provides current and prospective fund managers with the knowledge and tools they need to understand and control the unique world of hedge fund operation. Broad in coverage where most hedge fund books are narrowly focused, it draws on and summarizes salient research from all areas of the investment field, providing professionals with the one stop hedge fund reference that is currently as solely needed as it is difficult to find.

Whether you are currently a hedge fund professional or simply looking for a comprehensive and authoritative reference on the current knowledge in this fascinating area, Managing a Hedge Fund will provide you with the answers you need on topics including:
- Requirements for starting and operating a hedge fund - regulatory issues, investor requirements, risk evaluation and risk management
- Measurement of a wide range of risks, including liquidity, counterparty, operational, market, legal, transparency, and model risk
- Strategies for operating the numerous types of hedge funds, including equity, fixed income, MBS, global macro, distressed, and more

More than just focusing solely on the operational aspect of hedge funds, Managing a Hedge Fund also provides a dynamic picture of the history and current state of the industry. From the beginnings of their widespread popularity in the 1980s to the mistakes that led to the collapse of Long Term Capital Management to high-profile personalities like George Soros, author Keith Black pulls back the curtains to provide a compellingly honest and detailed portrait of an industry still in its relative infancy, yet growing in importance and impact with each passing year.

While it is true that hedge fund investing is not for everyone, it is also true that the universe of hedge fund investors has undergone incredible growth - growth that shows no signs of slowing down. Managing a Hedge Fund introduces you to the techniques and strategies that constitute today's hedge fund state of the art, and provides you with an intriguing glimpse of where this exciting industry is headed.

See all Editorial Reviews

Product Details

• Hardcover: 342 pages
• Publisher: McGraw-Hill; 1 edition (June 25, 2004)
• Language: English
• ISBN-10: 007143481X
• ISBN-13: 978-0071434812
• Product Dimensions: 9.1 x 6.3 x 1.3 inches
• Shipping Weight: 1.4 pounds
• Average Customer Review: 3.7 out of 5 stars  See all reviews (11 customer reviews)
• Amazon Best Sellers Rank: #1,092,153 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

32 of 35 people found the following review helpful:

2.0 out of 5 stars If you are a true buy-side prospect, this is kindergarten...., October 28, 2005

By 

Hedge Fund Trader "Hedge Fund Trader" (Manhattan, NY) - See all my reviews

This review is from: Managing a Hedge Fund: A Complete Guide to Trading, Business Strategies, Risk Management, and Regulations (Hardcover)

I am afraid I have to agree with the review here of Robert Altena wholeheartedly. This book simply describes the very basics of several investment strategies (most of which have existed for decades). Hedge funds have long ago moved beyond any of these strategies, although the obviously still employ all of them as a bulk of their operations, and they constantly move into uncharted territory. That is what is separating the top funds from the `pretenders' nowadays.

If these strategies are new to you and/or if you actually learned anything new from this book then you have NO business trying to start a hedge fund. Of course if you need to buy a book to consider doing so, then you are really in trouble anyways. This book is useful however for anyone that is considering putting their money with [reputable] hedge fund managers and therefore need to educate themselves on various basic strategies the funds may employ (thus why I gave it 2 stars instead of 0 or 1).

I think Mr. Black is an excellent professor and his writing in this book is pretty good, but the title is very misleading. A more accurate title may have been: The Basic Hedge Fund Strategy for Investors. For those who already work at buy-side institutions (or serious prop traders at bulge bracket firms), if you plan to branch out on your own please do not think ANY book will aid you in your quest. Instead, if you need insight into risk management, quant, partnership accounting, etc. in order to complete your education BEFORE starting a fund (recommended that you do!), then consider reviewing published industry papers from Wharton, MIT, Cal Tech, Chicago B.S., HBS, NYU, etc. (I would put particular concentration on the top finance and tech schools and not the top management schools - MIT, Wharton, NYU, etc.) These offer the best academic insight into how funds should be managed, in theory anyhow, in truly technical jargon. If you can't understand the jargon, then stick with working with your broker or day trading because starting a hedge fund will only put you into bankruptcy.

9 of 11 people found the following review helpful:

5.0 out of 5 stars Excellent Primer on Hedge Funds, April 26, 2006

By 

Yen Man - See all my reviews

This review is from: Managing a Hedge Fund: A Complete Guide to Trading, Business Strategies, Risk Management, and Regulations (Hardcover)

If you aren't familiar with hedge funds and need a book that explains it in layman's terms, this is the book for you. The title is a little misleading since it should be more appropriately named "A Primer on Hedge Funds" The author introduces what hedge funds are and its affects on portfolio performance and then explains various hedge fund strategies and how to measure hedge fund performance. The wealth of data presented in the book is well worth the money by itself. The author presents information such as tables on the Sharpe Ratios by strategy, Sortino Ratios by strategy, as well as correlations of the various hedge fund strategies to each other and to the S&P 500 during up and down markets and to the MSCI Debt index in up and down markets. The text is well written and an easy read. If you want more details on hedge funds in highly quantitative terms and have the background to understand them then you're better off reading articles from the Journal of Finance, Journal of Derivatives, Journal of Fixed Income, or other publications of this nature. Overall, if you are new to hedge funds and want to get your bearings on this hot topic, then this book is an excellent starting point.

2 of 2 people found the following review helpful:

3.0 out of 5 stars It's an OK book, but a little disappointed, October 6, 2009

By 

JB "JB" (Palm Springs, CA USA) - See all my reviews

Amazon Verified Purchase

This review is from: Managing a Hedge Fund: A Complete Guide to Trading, Business Strategies, Risk Management, and Regulations (Hardcover)

This book is OK, not horrible, not great, just OK. It's a bit more "dense" than I imagined and it reads more like a college or law school textbook rather an informative, concise manual. I felt like I was reading a series of case studies and laws more than a book that I could use on a daily basis as a reference guide. There's good information in here, but you will have to sort through A LOT of different items to get to the individual nuggets that you need.