Interest in hedge funds and hedge-fund trading strategies has risen markedly in recent years, as hedge fund-style investing has become more readily accessible to average investors, primarily through the expansion of exchange-traded funds (ETFs). For investors who want to learn more about hedge funds and how they operate, or aspiring hedge fund managers with a desire to expand their knowledge, here are five of the best books written about the hedge fund industry.
1. "More Money Than God: Hedge Funds and the Making of a New Elite," by Sebastian Mallaby
Sebastian Mallaby’s "More Money Than God" offers a definitive history of the hedge fund industry, from its beginnings in the 1960s, up through the 2008 financial crisis. In writing about the concepts behind the development and structure of hedge funds, Mallaby presents an argument that hedge funds, though often derided, are beneficial to the overall economy by virtue of providing a straightforward response to market forces and by the use of strategies such as arbitrage trading that efficiently correct mispricings or other anomalies in the market.
Put together in part by using several hundred hours of interviews with hedge fund managers, Mallaby’s book offers rare insights into the evolution of the hedge fund industry, the development of hedge fund trading strategies, and the psychology and mindset of the people who manage billions of dollars of investment capital daily. Published in 2010, this book won the 2011 Gerald Loeb Award for Distinguished Business and Financial Journalism.
2. "The Hedge Fund Book: A Training Manual for Professionals and Capital-Raising Executives," by Richard Wilson
Geared toward individuals who plan to start a career in the hedge fund industry, Richard Wilson’s book uses a case-study format to guide readers through analyses of different hedge funds in various phases of development and through their life cycles, presenting useful information for both potential hedge fund investors and for investment bankers or other financial professionals.
Wilson provides insights into the day-to-day operations of hedge funds and the activities of hedge fund managers, with regard to both trading and marketing a hedge fund. Wilson, a hedge fund consultant, wrote the book in essentially a textbook format, and it has, in fact, become standard reading on the hedge fund industry for financial professionals seeking the Certified Hedge Fund Professional (CHP) designation.
3. "Hedge Hogging," by Barton Biggs
Many of the most popular – and informative – books on the hedge fund industry are books that provide in-depth insights into the lives and minds of successful hedge fund managers. One such book is Barton Biggs’ autobiographical "Hedge Hogging" in which he relates the story of his founding and managing the multi-billion-dollar Traxis Partners hedge fund, following a long, distinguished career as an investment analyst at Morgan Stanley (NYSE: MS). In addition to his entertaining life story, Biggs offers insightful and sometimes humorous, insights into investment strategies, classic mistakes that investors often make, and the high-finance world of hedge fund traders.
4. "Market-Neutral Investing: Long/Short Hedge Fund Strategies," by Joseph Nicholas
Joseph Nicholas’ book delves into one of the most popular hedge fund trading strategies – long/short, or market neutral, trading. Market neutral trading strategies are a favored means of risk management in volatile market conditions, such as those that characterized the opening weeks of 2016. Investors have become increasingly attracted to long/short equity strategies, many of which have significantly outperformed the overall market average between 2005 and 2015.
Nicholas uses a database that includes more than a thousand hedge funds to lay out eight different long/short strategies for investors to consider using. He provides both historical performance data on each strategy and numerous examples designed to make it as easy as possible for investors to understand how each trading strategy works.
5. "Top Hedge Fund Investors: Stories, Strategies, and Advice," by Cathleen Rittereiser and Lawrence Kochard
Authors Cathleen Rittereiser and Lawrence Kochard have put together an entertaining and educational book filled with information compiled from hundreds of interviews with hedge fund investors and managers, along with detailed information on common hedge fund trading strategies. In the book, a number of highly successful hedge fund investors and managers, including investment analysts and directors for large institutional investors, and high-net-worth individuals (HNWI) share interesting stories from their own experiences in investing, along with specific investment strategies and helpful advice for other investors. The book manages to be both extremely engaging and entertaining while providing information that can be very helpful to both individual investors and professional money managers.