Managing Hedge Fund Managers: Quantitative and Qualitative Performance Measures

Preface

To many investors, the hedge fund world is shrouded in secrecy and compounded by complicated structures and investment vehicles. Even some investment professionals view hedge funds as Satan here on earth. The horror stories of investors losing millions of dollars while greedy hedge fund managers collect rock star salaries make for great headlines and raw meat for governments and regulators, but do little to advance the education of the investing public.

Understanding and investing in hedge funds can be a daunting task. Not everyone will have the resources or opportunities presented to them that a Harvard or Yale endowment fund has. This does not mean that if you are a qualified investor, in the legal sense, you should avoid the hedge fund space or, even more importantly, blindly invest in a fund on the basis of a tip you received at a cocktail party. The main goal of this book is to remove some of the shroud of secrecy in the hedge fund world and provide practical tools for investing in this space. Whether you consider hedge funds an asset class or just an investment vehicle, you need to understand some of the technical aspects of structure, the comparative performance statistics, and the continual vigilance needed to successfully navigate this investment field.

In this book, the process of investing in a hedge fund proceeds from the guidelines of an Investment Policy Statement, through investing in a chosen fund, and then to the follow-up monitoring that is needed. We ...