The Little Book of Hedge Funds
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.
Introduction: Anatomy of a Hedge Fund: The Password Is . . . xv
Chapter One What Is a Hedge Fund? The Traditional Long-Only Portfolio versus the Alternative Hedge Fund Portfolio 1
Chapter Two The Parlor Cars of the Gravy Train: The Long and the Short of It 29
Chapter Three Accessing the Inaccessible: From the Elite to Main Street 51
Chapter Four Heads We Win; Tails You Lose: Eating Your Own Cooking while Enduring Symmetrical Glories and Punishments 67
Chapter Five The Alpha Game: In Search of El Dorado 81
Chapter Six Ironing Out Inefficiencies: Exploiting the Efficient Market Theory 97
Chapter Seven A Balancing Act: Outperforming the Market while Taking Less Risk 117
Chapter Eight If You Can’t Beat ’Em, Join ’Em: Hedge Fund Manager Selection and Due Diligence 143
Chapter Nine The Men Behind the Curtains: Fund of Hedge Funds 169
Chapter Ten From Wall Street to Park Avenue: Setting Up Shop at the Hedge Fund Hotel 193
Conclusion: The Shape of Things to Come 215
Appendix: Due Diligence Questionnaire 223
Anthony Scaramucci is the Founder and Managing Partner of SkyBridge Capital, a global alternative investment and advisory firm. The firm has $5.8 billion in assets under management or advisement as of January 31, 2012. He was the cofounder 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 worked at Goldman Sachs & Co., where he was appointed a Vice President in Private Wealth Management in 1993.
Mr. Scaramucci is a recipient of the Ernst & Young Entrepreneur Of The Year 2011 New York Award in the Financial Services category and a board member of Warrior Gateway, The Lymphoma Foundation, and The Brain Tumor Foundation. He 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 and BENS (Business Executives for National Security). Mr. Scaramucci is the author of Goodbye Gordon Gekko: How to Find Your Fortune Without Losing Your Soul and a regular CNBC contributor.
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.
—The Huffington Post By Rob Taub Apr. 23, 2012
Anthony Scaramucci lifts the veil on the $1.6 trillion hedge fund industry in his new book The Little Book of Hedge Funds (Wiley, $22.95, May 2012; Hardcover and ebook) to show how it has grown exponentially and created wealth for many, including managers and their investors.
Scaramucci has made a career of explaining hedge funds to the elite – from Wall Street 2 Director Oliver Stone (he served as an adviser and sponsor) to President Obama (who he challenged at a Wall Street town hall) – and now he’s bringing that same insider knowledge to the everyday investor.
“Isn’t it time that someone unravels the once secret world of hedge funds?” Scaramucci writes in the introduction. “Isn’t it time to provide intellectually curious people with a comprehensive overview of the industry without clouding it with jargon, negativity, and dry numbers?”
As in his previous book, Goodbye Gordon Gekko (Wiley, 2010) Scaramucci uses examples from his two decade career in the business, from his time at Goldman Sachs to the founding and growth of his successful firm Skybridge Investments, to tell the story of the industry. He also interviews nearly a dozen hedge fund legends, getting their thoughts on what makes a successful fund.
The Little Book of Hedge Funds cements Scaramucci as the mainstream face of the hedge fund industry and a man with a mission. The book argues that the next step for hedge funds is to make them accessible to a new class of American investors – the mass affluent – who can benefit from this asset class.
The book also argues that millions of these mass affluent are already hedge fund investors through their pension plans. Scaramucci wants Americans to follow what the smart money managers are already doing in today’s volatile market place.
Other topics in the The Little Book of Hedge Funds include:
• From the elite to main street: hedge funds are providing greater transparencyand accessing a broader base of investors
• The growing role of hedge funds in the broader financial system
• Hedge funds reduce risk while maintaining performance
• Key strategies used by hedge funds – leverage, short selling and hedging – and their role in making hedge funds a successful asset class
Written with Scaramucci’s trademark wit and candor, The Little Book of Hedge Funds is a must read for all those seeking to understand this important industry.
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