Zask - All about Hedge Funds, Fully Revised Second Edition

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Chapter 1
What Is a Hedge Fund?

Chapter 2
Regulation of Hedge Funds

Chapter 3
Hedge Fund Organization

Chapter 4
Hedge Fund Service Providers

Chapter 5
Short Selling and Leverage

Chapter 6
Derivatives: Financial Weapons of Mass Destruction

Chapter 7
History of Hedge Funds

Chapter 8
Hedge Funds, Shadow Banking, and Systemic Risk

Chapter 9
Key Events in the Development of Hedge Funds: Long-Term Capital Management and the Credit and Liquidity Crisis

Chapter 10
Mounting Criticism of Hedge Fund Performance

Chapter 11
Is Smaller Better in Hedge Funds?

Chapter 12
Statistical Measures of Performance

Chapter 13
Aggregate Measures of Hedge Fund Performance

Chapter 14
Hedge Fund Returns from the Investors Viewpoint

Chapter 15
Overview of Hedge Fund Strategies

Chapter 16
Equity Hedge Strategies

Chapter 17
Event-Driven Strategies

Chapter 18
Relative Value Strategies

Chapter 19
Global Macro and Commodity Trading Adviser Strategies

Chapter 20
Hedge Fund of Funds

Chapter 21
Modern Portfolio Theory and Efficient Market Hypothesis

Chapter 22
Behavioral Critique of Efficient Market Hypothesis

Chapter 23
Institutionalization of Hedge Funds

Chapter 24
Hedge Funds and Retail Investors

Chapter 25
Manager Selection and Due Diligence

Chapter 26
Risk Management

Chapter 27
Recent Hedge Fund Controversies

I founded a hedge fund in 1991 and spent the subsequent 20 years in the hedge fund industry, participating in its amazing transformation. There were fewer than 1,000 hedge funds managing $58 billion in 1991 compared with over 10,000 funds managing $2 trillion today. The dominant hedge fund strategy in 1991 was global macro, which entailed leveraged bets on the direction of global currency, interest rates, commodities, and stock markets, whereas today the strategies pursued by hedge funds are diversified and divided between equity, fixed income, global macro, and others. Finally, the investors in 1991 were predominantly wealthy individuals while today they are largely institutions, including pension funds, university endowments, and sovereign wealth funds ().

FIGURE 0 1

It is fair to say that hedge funds have evolved from marginal investment vehicles for the rich into mainstream investments for the worlds largest institutional investors, including CalPERS (the largest U.S. pension fund), the Yale Endowment, State of Massachusetts $50 Billion Pension Reserves Investment Management Board, and the China Investment Corporation.

And yet, most peoples knowledge of hedge funds comes from the news headlines, which tend to focus on the sensational aspects of the industry: the incredible wealth of some of its managers; the out-sized gains (i.e., Paulson & Company, which made billions by correctly predicting the collapse of the U.S. housing market) and losses (i.e., Long-Term Capital Management, which lost billions in 1998 and caused a major crisis in the global financial system) of some of the larger funds; the frauds perpetrated by some managers (frequently including Bernard Madoff, who was