Ted Seides - So You Want to Start a Hedge Fund: Lessons for Managers and Allocators

There are virtually no books on the topic of how to pick individual hedge fund managers, so this is a must read for any asset allocator, whether a professional or a high net worth investor. In fact, all aspiring or current managers would also benefit from reading this book. Ted shares his wisdom from two decades of investing in hedge funds of all types and sizes, with particular insight into investing in early stage managers.

Jonathan A.G. Auerbach, Hound Partners

There is no one better-equipped than Ted Seides to author a book on starting a hedge fund. From his early training at the Yale Investment Office to his instrumental role at Protg Partners backing some of the best and brightest investment managers, Ted has forgotten more than most of us will ever know about the challenges of launching a fund. His refreshingly honest insights will resonate with readers of all backgrounds.

David Z. Solomon, Managing Director,
Goldman Sachs Investment Partners

Ted Seides' extensive experience in identifying and supporting emerging hedge fund teams provides him with a unique insight into the hedge fund industry and valuable lessons for investors in the asset class. His book provides an interesting view into the challenges and opportunities for astute investors.

Paula Volent, Senior Vice President for Investments,
Bowdoin College

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Copyright 2016 by Ted Seides. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

ISBN 978-1-119-13418-3 (Hardcover)
ISBN 978-1-119-15697-0 (ePDF)
ISBN 978-1-119-15698-7 (ePub)

For Eric, Ryan, and Skylar (in alphabetical order),

My three most treasured start-ups.

When I followed one of my mentors, Barton Biggs, in setting up my own investment firm a few years back I felt uniquely prepared to embark on that effort. After all, I had spent nearly a decade at one of the best run hedge funds in the business, a number of years at Morgan Stanley, one of the most important brokers servicing the industry, several years as a securities analyst covering the investment management industry and ten years teaching Ben Grahams Securities Analysis Class at Columbia Business School. Just through osmosis I got to know a number of folks who have built wildly successful investment operations. I even sat (and still sit) on the board of Rich Pzenas eponymous investment firm. What the heck else was there for me to possibly consider? Hang out my shingle, raise a few shekels and get on with it.

Well, before I rang that opening bell a friend of mine counseled that I should reach out and spend time with Ted Seides. I am glad I did. No one knows more about the start-up process for a hedge fund than Ted. He has become a key player in driving the growth of the modern hedge fund industry from its early stage as the popular new kid on the block, through awkward adolescence to the mature, institutional paradigm that dominates the landscape today. Ultimately, Ted not only became an important early investor in my fund but also a friend; I am immensely grateful to know him in both capacities.

Which brings me to So You Want to Start a Hedge Fund. Prior to college, I must have read every book ever published on baseball. Good (My Turn at Bat) or bad (Super JoeThe Life and Legend of Joe Charboneau) the combination of statistics and larger than life personalities sucked me in where fiction could not. When it became clear the Red Sox were not going to be in the market for a left-handed shortstop, I turned my literary focus to books on the investment world. I am not ashamed to admit itI have read pretty much every book published on investing. From People magazine-like treatments of investment stars to the only true investment BibleBen Grahams Securities Analysis I must have read them all. Amazingly though, despite explosive growth in the hedge fund industry (there are now more hedge funds than stocks listed on the NYSE) and breathless coverage from the media that vacillates between fawning and schadenfreude, there have been virtually no insightful treatises on the inner workings of hedge funds. Until today.

So You Want to Start a Hedge Fund is the first book written by an insider that looks under the hood of the industry and offers thoughtful views on key success drivers and pitfallsfor asset allocators and managers alike. Effectively, through a combination of anecdotes, data and reasoned judgment, Ted has produced the first owners manual for the hedge fund industry. Crucially though, this is not a cookbook. That is, there is no secret recipe inside that says start with a bag of dough, add some quantitative meat, season with experience and you have an alpha pie. As with picking stockswhile there may be basic True North principles in building (or selecting) an investment management businessthere is also an immense amount of nuance to the process. Ted captures that here.

Ted has also seen firsthand virtually every mistake an investment entrepreneur can make. I now knowI made a bunch of emmost outlined vividly in this book. For the budding hedge fund managertrust meyou will find your own creative and original mistakes to make, so you may as well use this book to avoid the more familiar ones. Indeed, one of my chief regrets is that Ted did not write the book three years ago so I could have read the galleys