Hedge Funds for Dummies is a book about hedge funds. Now that’s a shocker. But it really isn’t just for dummies it’s for anyone (including smart people, like you) who want to know more about the complex world of hedge funds. It was written by Ann Logue and attempts to address the key questions that you might have about hedge funds.
It starts by addressing the age old question: “What is a hedge fund?” And it progressively delves deeper and deeper into some of the other questions that you might have about these secretive investment vehicles, like whether hedge funds are right for you and how to set up the right hedge fund investment strategy. It even covers how to perform due diligence on a potential investment and hiring a consultant to choose the right hedge funds for your personal circumstances.
So what is a hedge fund?
A hedge fund is a lightly regulated investment that is managed by a financial professional known as a hedge fund manager that invests or even trades in a diverse set of securities in an attempt to generate higher returns with less risk.
What sets hedge funds apart from mutual funds?
The primary difference between hedge funds and mutual funds has to do with regulation. Hedge funds are more lightly regulated than mutual funds and so regulators generally require that they are only offered to sophisticated accredited investors only.
Another big difference is in fund manager compensation. Hedge fund managers are compensated with a performance fee that is based on how well their funds perform. While mutual fund managers are only compensated on the size of their assets under management. This gives hedge fund managers a greater incentive to generate higher returns than mutual fund managers.
What is good about Hedge Funds for Dummies?
The best part of this book is that it delves a little deeper into hedge fund topics that really matter. For instance, it covers hedge fund due diligence. This is an absolutely critical aspect of hedge fund investing. If your due diligence is weak, you may find yourself a victim of a fraudster like Bernard Madoff. Obviously, no one wants that. So pay close attention to the chapter on hedge fund due diligence.
Another good part of this book focuses on evaluating hedge fund contracts. You should have a good understanding of all the terms and clauses in any contract that you sign. You should have a good grasp on lockup provisions, sidecar clauses and other contractual provisions that could be harmful to your interests as a hedge fund investor. A close reading of all hedge fund contracts and an understanding of their clauses is critical to protecting your investment capital.
All in all, Hedge Funds for Dummies is a good book to learn more about hedge funds even if you aren’t a dummy.