This book will teach you how to select funds based on the reliability
of their business models and investment strategies. It will teach you
how to understand the details of investment processes used by asset
managers as well as the quality and substance of their operations. In
addition you will learn about investment advisors and other service
providers that are in the business of recommending funds or servic-
ing funds. After reading this book you will be able to understand, like
never before, how funds operate and the obvious, and not so obvi-
ous, pitfalls everyone should avoid. I will explain, in simple practical
terms, what all investors should know. The ideas and explanations in
this book are comprehensive but simple. They can be used by sophisti-
cated professionals as well as regular private investors with an interest
in challenging the accepted wisdom of their advisors. I will also point
you to many websites and other resources to help you investigate
funds and asset managers quickly and cheaply, if not for free.
Of course, any author with the ambition of explaining things in
simple terms is confronted with the hard reality that there are many
technical terms used in the fund management industry. To help I have
included my own, non-technical, glossary. You can refer to it when-
ever you see a defined word, which will be emphasised in bold in the
text when it is first used in each chapter.
My real introduction to the investment fund industry came in 2003
when I was asked to join a leading hedge fund, Rhicon Currency
Management, by an old university friend and star trader, Christopher
Brandon. Prior to that, I had worked as a solicitor on international
financial transactions and fund structures in the City of London
at Jones Day. My understanding of funds, other than their legal
Introduction
x Introduction
structure, was limited. When I was exposed to the funds world, and
specifically to the hedge fund world, I felt like I had been dropped
in the middle of the Channel, in the cold of winter, and asked to
make my way back to the white cliffs of Dover pretty much on my
own! I loved it, and I quickly realised that funds were very ordinary
structures, ultimately controlled by asset managers situated in major
financial centres like New York, London or Paris. Knowing that, it
struck me that this was not how they were sold to investors, the focus
being placed on the fund itself, sometimes a pooling vehicle estab-
lished in some remote country.
From my private equity expertise of buying and selling companies
for clients, it dawned on me that investors should consider funds by
reviewing the asset manager’s business, just as they would buying into
any other business. I wanted to explain to investors that asset manag-
ers had many attributes and weaknesses and that this was the most
relevant information that investors needed to consider, not the track
record, nor even the legal establishment of the fund in isolation. It
is the asset manager’s team and its operations that matter most with
regards to the sustainable life and performance of the fund. The genius
of some asset managers is only one aspect of that and, in the wrong
business context, they will struggle to succeed, however much they
are geniuses. From that premise, I endeavoured to coach investors to
understand how that business works. I felt that this process of educa-
tion was the strongest safeguard against choosing the wrong fund. I
think anyone can achieve this understanding.
In this book I aggregate all of my coaching efforts and hope to give,
for the first time, a new and complete picture of the business of asset
managers and the funds they run. Where possible I use hard facts and
case studies to illustrate many points, usually involving hedge funds as
they tend to be more liberal and therefore at times more likely to pose
a risk. Bear in mind that hedge funds can be lurking in any portfolio
(now as UCITS too), so even if you do not contemplate direct invest-
ments in hedge funds, you may well be exposed to them through
structured products or funds of funds sold to you by your bank.
I decided to write this book in May 2009, largely as a result of the
impact of the financial crisis on investors. I felt that investors had
been hard done by the industry. Those exposed to long only funds

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