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 ten of the best books written about the hedge fund industry.
- A hedge fund is a broad category of alternative investment funds that invest more aggressively or in different types of assets than traditional mutual funds.
- Hedge funds tend to come with an aura of mystique, since they have often been only available to accredited investors and requiring large minimum investments.
- You can take away a bit of that mystique and look under the hood by reading one of these excellent books on the topic of hedge funds.
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.
6. "All About Hedge Funds: The Easy Way to Get Started," by Robert A. Jaeger
All About Hedge Funds debunks several hedge fund myths and explains how any investor can take advantage of the high-potential returns of hedge funds while incorporating safeguards to limit their volatility and risk. This clear-headed, commonsense guide tells investors: What hedge funds are--and what they are not; Four key hedge fund strategies; How to incorporate hedge funds into an existing portfolio; Types of risk involved in hedge fund investing.
7. "Hedge Funds for Dummies," by Ann C. Logue
This book from the "For Dummies" series will demystify hedge funds in an easy to understand way, using lay terminology and helpful infographics and charts. It's a basic book about the complicated world of hedge funds. If you're interested in the topic and new to the game, consider getting this.
8. "The Little Book of Hedge Funds," by Anthony Scaramucci
Anthony Scaramucci is a well-known hedge fund manager and was, for a brief stint, the White House communications director under president Donald Trump. This book gives a first-hand account of the process of setting up and running a hedge fund in a way that is easy to read and grasp. It provides good narratives of the growth of the industry and the potential for superior, risk-adjusted returns of hedge funds versus the general markets and versus mutual funds and ETF's. He also interviews other prominent hedge fund managers in making his case.
9. "Hedge Funds: Definitive Strategies and Techniques," by IMCA
This is a more advanced and math-heavy book about hedge funds and trading strategies geared toward seasoned financial professionals. The book covers risk measurement, hedging, alternative asset classes, and more, drawing from a range of expert authors from both academia and hedge fund practice. If you're new to shudder at mathematical equations, this book is probably not for you. But if you're serious about a deep dive under the hood of hedge fund strategies, buy this book.
10. "Hedge Fund Market Wizards," by Jack D. Schwager
Jack Schwager returns with a new hedge fund-oriented book in his Market Wizards series, here interviewing successful hedge fund managers in order to glean insights and expert opinions about the hedge fund industry. Written in a conversational tone, it is sure to capture the attention of both new and seasoned Wall Street readers.