Learning Center
Plans & pricing Sign in
Sign Out

How to Invest In Hedge Funds


									Book Review

by Matthew Ridley
Kogan Page, London, UK, 2004; ISBN 0-7494-4084-8; 409 pp; hardback; £40
or $75

‘How to Invest in Hedge Funds: An              practical settings, a welcomed addition. He
Investment Professional’s Guide’ is one of     then examines the basics of each strategy
the recent texts on the subject. The author    and moves forward to discuss the fine
nicely introduces and demystifies the           points in great detail rarely found in many
common misconceptions of hedge funds           hedge fund texts. Every chapter
and discusses a few complex strategies. He     investigating each hedge fund strategy
further highlights the time line of hedge      concludes with key considerations and a
funds since 1949 with the introduction of      glossary. Graphs are also added to each
the first hedge fund by A. W. Jones.            chapter on each individual strategy assessing
Furthermore, for many investors doubting       various associated risk factors along with the
the superior performance of hedge funds,       attributes of every hedge fund strategy. The
the author provides strong and clear           penultimate chapter examines the global
evidence as to the merit of their record       macro strategy. Commodity trading advisers
with graphs, tables and performance in         (CTAs) are also briefly discussed. Ridley
extreme market events. The costs and           clarifies that CTAs can provide an effective
benefits are further examined, along with a     combination and diversification tool in a
summary of a dozen articles by well-known      traditional stock and bond portfolio.
and respected academics in the field to see        Reading this book will educate the
what is being said about the world of          average investor, bringing him/her from the
privately managed money called ‘hedge          basics to the advanced material in an
funds’. The author further examines            uncomplicated fashion. The book
whether the industry is presently in a hedge   demonstrates the author’s immense
fund bubble. In addition, the author           theoretical and practical knowledge on
discusses the selection of hedge funds using   hedge funds and how they can be
due diligence, qualitative analysis,           implemented in an investment portfolio.
quantitative performance measures, factor      The level of statistics in the text is
analysis and the correct way to monitor        elementary and clear to understand.              Derivatives Use,
                                                                                                Trading & Regulation,
hedge funds.                                      The concluding chapter presents the           Vol. 11 No. 1, 2005,
                                                                                                pp. 94–95
   The author also compares portfolio          reader with a how-to approach to selecting         Henry Stewart
construction in both theoretical and           a fund of hedge funds. This popular              1747–4426

94          Derivatives Use, Trading & Regulation V olume E leven Number One 2005
strategy allows small investors to access      reference for financial professionals and
many hedge fund strategies with a small        academics as well as any investor interested
outlay of money. Here, the philosophy of a     in understanding hedge funds. Matthew
fund of hedge funds along with its benefits     Ridley has done an excellent job, especially
and drawbacks is addressed. The author         with his countless tables and figures, and
highlights how the sales pitch of a fund of    further confirms that hedge funds are here
hedge funds can inform investors about the     to stay. In essence, this book should be
fund itself and points out that stability,     considered as a handbook on the subject of
product structure and track record are         hedge funds. Congratulations on an
essential and vital when selecting a fund of   informative and illustrative text.
hedge funds.
   This book is a must read for academics,                  Greg N. Gregoriou, PhD
risk management specialists, money                               Hedge Fund Editor
managers, analysts, hedge fund mangers,          Associate Professor of Finance and
CTAs, lawyers, accountants and others              Coordinator of Faculty Research,
looking for a clear presentation of the          School of Business and Economics,
subject. Aside from the practical view, I             State University of New York
considered this book to be a fundamental                         (Plattsburgh), USA

Book review                                                                              95

To top