Manju Gupta
The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds, Maneet Ahuja, John Wiley & Sons Inc., Pp 245, $ 29. 95
THIS book takes the reader on a journey through the mysterious world of successful hedge fund managers while revealing the personality of the managers, their philosophies, styles, quirks and working practices.
The mystique of hedge funds is undeniable. In the investment management world, hedge funds are often referred to as “smart money”. They command premium fees and are thought to attract the best and brightest talent. They are known to have made billionaires and hundreds of millionaires. But, as much as they are admired, hedge fund managers are feared and in some quarters, even loathed because in their ruthless pursuit of profits, they pose risks to the stability of the global financial systems. Hedge funds are thus considered illicit earnings.
Nowadays hedge funds are either characterised as highly adaptable and responsive pools of money that help markets become more efficient and in the process, generate supernormal returns for their clients in a manner that is consistent with the common good or are viewed as grossly overpaid investment vehicles that consistently promise more than they can deliver, while the hedge fund managers try to harvest private gain at the cost of the general public through some practices that are considered morally, ethically and legally questionable.
The hedge fund industry has two deterministic factors – the type of investment vehicles and the investment managers that have self-selected to run them. The author tells about the world of activist investors whose objective is to unlock the hidden value in companies either through operational improvements or through the more controversial company restructurings and asset stripping. She also talks of the macro funds, an approach that George Soros became famous for in the 1990s when he boldly took on the United Kingdom’s currency policy and won. These managers treat the world as their oyster and find it full of absolute and relative value trades.
The author also tries to show how most successful hedge fund managers face enormous difficulties and challenges along what way. Some find it hard to convince their first set of investors; others pull along somehow for years before hitting their target; some have to see things crumble in front of their eyes and in full media glare; some face the constant challenge of maintaining internal harmony in the midst of unforeseen success and most can claim a particular moment of good luck that enables them to decisively pull away from the herd, struggle but fail to differentiate themselves in an incredibly cut-throat competitive environment.
The book is about personalities who due to dramatic successes are eagerly followed and what makes these talented individuals click. While giving an insight into the personalities of successful hedge fund managers and how it affects them, the author’s analyses suggest that there is no simple formula for success in the hedge fund world or single way to organise a hedge fund for success. There is no special set of indicators to follow, books to read or expert analyses to digest either.
The author, who a CNBC’s hedge fund specialist and producer of Squawk Box, the network’s highly watched morning show, narrates the stories of the money-makers who are big players – “the behind-the-curtain rock stars whose strategies and successes surpass those of the vast majority of investors and the globe.”
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