The Little Book of Hedge Funds

Foreword

In 1972 Woody Allen filmed the funny movie Everything You Always Wanted to Know about Sex But Were Afraid to Ask. It has taken 40 years, but now finally Anthony Scaramucci has written the perfect and comprehensive manual on Everything You Always Wanted to Know about Hedge Funds But Were Afraid to Ask.

Using the layman’s language and a wit that at times parallels that of Woody Allen’s comic genius as Anthony is a man who is as funny as he is smart. He provides the perfect primer on the esoteric world of hedge funds and their investment strategies. And being an insider who knows about hedge funds as much as anyone can—by running a leading fund of hedge funds—Anthony can reveal in simple but clear and still profound terms the explanation of exotic terms such as alpha, absolute returns, shorting, hedging, leverage, and two-and-twenty. It is a true insider’s guide to hedge funds.

In the process he discusses many important open and controversial issues. Is there true alpha? My answer is a partial yes, as there are a number of hedge fund managers who can provide superior uncorrelated absolute returns even if many others are just mimicking beta or do not have superior investment skills. So it does take a lot of work to pick the right managers, and that is the challenging role that funds of hedge fund can and should play.

Why has the industry become so big? Because in a world of low returns on traditional investments as zero policy rates are now the norm, there is a huge demand ...