The Hedge Fund Mirage: The Illusion of Big Money and why it’s too Good to be True, Simon Lack, John Wiley & Sons, Inc., Pp 187, $ 34.95
THE author, employed by JP Morgan for 23 years and now running SL Advisors LLC, is a pioneer in the development of the market for credit derivatives and a hedge fund investor who is strongly in favour of hedge funds, agrees that not all hedge funds have been a bad investment for many because many talented hedge fund managers have provided enormous value to their astute clients.
In the early days, a small number of intrepid investors accepted that hedge funds are unregulated, pursued trading strategies that were run by highly talented yet largely unknown traders. As the trading business grew, different specialisations developed and the personal fortunes of top managers led some investors to look for opportunities to partner with tomorrow’s stars.
There are some fantastically talented hedge fund managers with keen commercial instincts. The investors who have made this possible owe it to the pension fund beneficiaries and other hapless providers of capital to improve their outcomes. It was the year 2008 that redefined for investors how bad things could really be. Not only did hedge funds lose far more for their clients, stocks, bonds, emerging markets, private equity and real estate – all delivered thumping losses, as the financial system very nearly collapsed. So much so that some notable hedge funds were forced to close. It was the following year that the seeds of recovery were seen and phoenix-like, markets and hedge funds rebounded the following year. For the survivors of 2008, those who had managed to preserve enough capital to be buyers, almost every market offered opportunity rarely seen before.
(John Wiley & Sons, Inc., Hoboken, New Jersey.)