The hedge fund industry is reknown for it’s high returns and low profiles. A combination that makes it the regular focus of media attention.

For those that don’t know a hedge fund is a private investment fund open to only a limited range of qualified investors. Typically the fund charges a 1% management fee and a 20% performance fee. The number of hedge funds has grown significantly in recent years and in some markets they account for around 50% of all trades.

Traditionally hedge funds often sought to offset potential losses in the markets they invest in by hedging – typically through the use of options, shorting. However, as often happens the term “hedge fund” has been overused and inappropriately applied and many of so-called “hedge funds” do not actually hedge their investments.

Hedge funds are not allowed to market to investors who are not professional investors or certified high net worth individuals. As a result this limits the information a hedge fund is legally required to release. In addition divulging a hedge fund’s portfolio and trading strategy unreasonably compromise their business interests; as a result they don’t want to release much information.

In spite of this, the author, Katherine Burton has managed to interview a number of legends of the hedge fund industry. In the interviews they describe how they became hedge fund managers, their trading strategies (often sharing some of their biggest successes and failures) and what in their view makes a smart investor.

Burton is a reporter with Bloomberg News covering hedge funds and investment management, prior to that she worked for several other well known papers. She also holds an MBA.

I’d been looking forward to reviewing this book as I knew very little about hedge funds. Now that I’ve read it two things stand out; hedge fund managers (or at least some of them) are long term investors focused on value investing rather than day traders or technical investors basing their trades on quantitative analysis; the recent press coverage suggesting that smart young business people are skipping an MBA and a career in investment banking to make millions working for a hedge fund appears to have no basis in fact, from reading this book it seems they’d make considerably less.

I wasn’t disappointed, it was a fascinating and enjoyable read. If like me you want to know more about the hedge fund industry then I suggest you read it.

You can buy it from Amazon UK or Amazon USA.

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