Introduction
As I completed my earlier book, Investing in Hedge Funds: Strategies for the New Marketplace, in the fall of 1998, an increasing number of questions about market-neutral investing began to flow into the offices of Hedge Fund Research (HFR). These inquiries were motivated by events such as the failure of Long Term Capital Management and the over and underperformance of market-neutral funds in 1998. Some of the funds in question performed quite well during the period, and others were less successful; yet both types were promoted as “market neutral.”
In today's volatile markets, it is not hard to see the allure of the market-neutral tag. Investors have expressed a compelling need to protect some portion of their assets by making allocations ...
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