What Hedge Funds Really Do: An Introduction to Portfolio Management
By Philip J. Romero & Tucker Balch
What Hedge Funds Really Do is a handy guide for finance novices or economic students looking to boost their understanding of the mathematical nitty gritties involved with hedge funds and also serves as a useful tool for professionals seeking to improve their investing and trading acumen. Written by Tucker Balch, a fund practitioner and computer scientist, and Romero, a public policy economist and finance academic, this is a lucidly explained instructional kit which succinctly summarizes the core ideas that make up hedge fund strategies and provides a concise reading on portfolio management.
The book is divided into four modules and moves from a basic introduction of investing fundamentals to more advanced techniques that are required in program trading systems and concludes with a read-up on the recent important developments in hedge funding that will provide a context for investors and programmers of the environment in which they will operate in. This book can prove even helpful to the advanced learners as its introductory chapters provide an interesting historical perspective of the hedge fund industry. It also profiles several financial legends such as Julian Robertson and George Soros to give an insight into the minds of the people who have been the torchbearers in the field of hedge funding.
The first module, i.e. Part I: Investing Basics, offers a brief introduction on investing to readers who pretty much have zilch knowledge or training in finance. Trained professionals will also find this module as a useful compendium to refresh their financial knowledge. Part II: Investing Fundamentals studies in detail the CAPM theory and Efficient Market Hypothesis to help formulate an optimal portfolio in view of the risk profile of the prospective investor.
Once a solid financial foundation has been built with the first two parts, one can start with Part 3, ‘Market Simulation and Portfolio Construction’, where the book dives deep into the core techniques that are beneficial for programmers dealing with trading systems. These are the hedge fund strategies and rules that must be diligently studied in order to establish a strong base in understanding portfolio management. The final module or Part IV: ‘Case Study and Future Directions’ provides interesting case studies on recent development in the hedge fund market, which not only enhances the interest of the reader, but also gives an outlook of what direction the industry is headed towards and the environment in which hedge fund professionals will be working in. Finally, a glossary of the financial and investing terms used, along with a list of teaching cases that will help instructors who teach this course is provided at the end.
What Hedge Funds Really Do is an easy to read book, with several compelling examples provided by Balch and Romero while explaining different strategies- this really maintains your interest. The discussions make you think and relate how all the mathematical and theoretical concepts are linked together in the broader picture. Overall, this is a great addition to your finance and investing library. Strongly recommended!
Review by Geetika Sachdeva: