Foreword
Hedge funds employ some of the brightest minds in the fields of finance, mathematics, and the sciences. But that did absolutely nothing to help save investors from Bernie Madoff’s $65 billion Ponzi scheme, the largest swindle in the history of mankind. Nor did it protect them from recent 50 percent-plus losses at some of the largest and most established hedge funds in the world.
What happened? Where was the Securities and Exchange Commission (SEC)? Should investors forget about hedge funds entirely and go back to buying and holding simple stock indexes, bland mutual funds, or 2 percent certificates of deposit (CDs)?
This book provides the answers: The scandals and dismal performance of the immediate past can be turned into a great opportunity for the immediate future.
First and foremost, it’s an opportunity to learn the best of lessons that can only be taught by the greatest of shocks. Investors can learn how to better identify the early warning signs of bad intent or bad performance. Plus, regulators can learn more precisely how to restore and maintain investor confidence.
The hedge fund industry as a whole is not on the precipice of perversity, and every hedge fund manager is not on the edge of evil. Quite to the contrary, provided investors can learn how to better select the right ones, they can reap the advantages of:
• True diversification across multiple asset classes. Hedge funds invest not only in stocks and bonds, but also in currencies, commodities, and real ...