Rights Contact Login For More Details
- Wiley
More About This Title The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True
English
Shocking but true: if all the money that's ever been invested in hedge funds had been in treasury bills, the results would have been twice as good.
Although hedge fund managers have earned some great fortunes, investors as a group have done quite poorly, particularly in recent years. Plagued by high fees, complex legal structures, poor disclosure, and return chasing, investors confront surprisingly meager results. Drawing on an insider's view of industry growth during the 1990s, a time when hedge fund investors did well in part because there were relatively few of them, The Hedge Fund Mirage chronicles the early days of hedge fund investing before institutions got into the game and goes on to describe the seeding business, a specialized area in which investors provide venture capital-type funding to promising but undiscovered hedge funds. Today's investors need to do better, and this book highlights the many subtle and not-so-subtle ways that the returns and risks are biased in favor of the hedge fund manager, and how investors and allocators can redress the imbalance.
- The surprising frequency of fraud, highlighted with several examples that the author was able to avoid through solid due diligence, industry contacts, and some luck
- Why new and emerging hedge fund managers are where generally better returns are to be found, because most capital invested is steered towards apparently safer but less profitable large, established funds rather than smaller managers that evoke the more profitable 1990s
Hedge fund investors have had it hard in recent years, but The Hedge Fund Mirage is here to change that, by turning the tables on conventional wisdom and putting the hedge fund investor back on top.
English
SIMON LACK has spent his entire career in trading and hedge fund investing. After twenty-three years with JPMorgan, he founded SL Advisors, LLC, a Registered Investment Advisor, in 2009. Much of Lack's career with JPMorgan was spent in North American fixed income derivatives and forward FX trading, a business that he ran successfully through several bank mergers, ultimately overseeing fifty professionals and $300 million in annual revenues. He sat on JPMorgan's investment committee which allocated over $1 billion to hedge fund managers and founded the JPMorgan Incubator Funds, two privateequity vehicles that establish economic stakes for emerging hedge fund managers. Lack's financial markets experience dates back to 1980 when he began his career on the floor of the London Stock Exchange.
English
Introduction xi
Acknowledgments xv
Chapter 1 The Truth about Hedge Fund Returns 1
How to Look at Returns 2
Digging into the Numbers 3
The Investor’s View of Returns 6
How the Hedge Fund Industry Grew 10
The Only Thing That Counts Is Total Profits 13
Hedge Funds Are not Mutual Funds 14
Summary 16
Chapter 2 The Golden Age of Hedge Funds 19
Hedge Funds as Clients 20
Building a Hedge Fund Portfolio 22
The Interview Is the Investment Research 24
Long Term Capital Management 27
Too Many Bank Mergers 30
Summary 33
Chapter 3 The Seeding Business 35
How a Venture Capitalist Looks at Hedge Funds 36
From Concept to the Real Deal 38
Searching for That Rare Gem 41
Everybody Has a Story 46
Some Things Shouldn’t Be Hedged 50
The Hedge Fund as a Business 52
Summary 56
Chapter 4 Where Are the Customers’ Yachts? 59
How Much Profit Is There Really? 60
Investors Jump In 63
Fees on Top of More Fees 65
Drilling Down by Strategy 69
How to Become Richer Than Your Clients 74
Summary 77
Chapter 5 2008—The Year Hedge Funds Broke Their Promise to Investors 79
Financial Crisis, 1987 Version 80
How 2008 Redefined Risk 82
The Hedge Fund as Hotel California 85
Timing and Tragedy 93
In 2008, Down Was a Long Way 97
Summary 98
Chapter 6 The Unseen Costs of Admission 99
How Some Investors Pay for Others 101
My Mid-Market or Yours? 104
The Benefits of Keen Eyesight 107
Show Me My Money 111
Summary 115
Chapter 7 The Hidden Costs of Being Partners 117
Limited Partners, Limited Rights 118
Friends with no Benefits 120
Watching the Legal Costs 125
Summary 128
Chapter 8 Hedge Fund Fraud 129
More Crooks Than You Think 130
Madoff 133
Know Your Audience 134
Accounting Arbitrage 101 136
Checking the Background Check 138
Politically Connected and Crooked? 140
Paying Your Bills with Their Money 141
Why It’s Hard to Invest in Russia 143
After Hours Due Diligence 145
Summary 146
Chapter 9 Why Less Can Be More with Hedge Funds 149
There Are Still Winners 151
Avoid the Crowds 154
Why Size Matters 158
Where Will They Invest All This Money? 166
Summary 168
Afterword 171
Bibliography 177
About the Author 181
Index 183
English
"Simon Lack, a hedge fund veteran exposes some unforeseen and uncomfortable truths about the industry in his new book." (Hedge Fund Net, January 2012)
"...a cautionary tale from one who knows just about all the tricks...an easy, largely fun and certainly instructive read" (Financial World, February 2012)
"Devastating little book.... His conclusions will make uncomfortable reading for many self-styled 'masters of the universe'.... This book should be required reading for pension fund trustees." (Jonathan Ford, Financial Times, 19th February 2012)
