A highlight of Good Will Hunting is the realization that there’s no need to stop learning if you still have time to pick up a book. Below are notes or ideas from a recent loan from the library.

Book: Understanding Hedge Funds
Author: Scott Frush

Book Review

As the third book on the topic I’ve read in a few months, I was hoping for a quick read to polish off the more general topics of the hedge fund industry. Unfortunately, this book concentrates too strongly on generalizations, and the amount of true knowledge contained in its pages is no longer than my notes listed below.

The author, Scott Frush, must be new to the copy & paste function of Microsoft Office, because repetition is a common style used throughout the book. Concerned you won’t remember the commission structure of hedge funds? Worried that you may not know the regulatory differences between hedge funds and mutual funds? Fear not, Frush copies and pastes his brief paragraphs throughout the book. It’s a wonder that his editor managed to make each repetition read like separate pieces of content through the magic of rearranging words.

Further, Frush frequently comes off as a salesman of hedge funds, making grand statements such as “Contrary to what the media says about hedge funds, fraud is not widespread,” without any sources or explanations. His opinionated comments are stated as facts throughout his chapters, whether discussing regulation, the weaknesses of mutual funds, or the importance of having a small management structure leading a fund.

Without a better word to explain it, much of the content comes off as elementary. Do not expect an in-depth discussion on the hedge fund industry. As a primer, the book may be of value to newcomers, but make sure to be flexible on skipping pages (or at times even chapters).

At the least, the book provides a few laughs, assuming laughter will prevent you from throwing the book during one-off sentences (which are never explained) like this:
“Regulators do not like hedge funds, which is basically alright as hedge fund management teams do not especially like regulators.”

Key Book Notes (Cliff Notes):

Hedge Fund Style
- Tactical (or Directional)
— Macro-Centric
— Managed Futures
— Long/Short Equity
— Sector Specific
— Emerging Markets
— Market Timing
— Short Selling
- Relative Value (or Arbitrage)
— Convertible Arbitrage
— Fixed-Income Arbitrage
— Equity Market Neutral
- Event-Driven
— Distressed Securities
— Reasonable Value
— Merger Arbitrage
— Opportunistic Events
- Hybrid
— Multi-Strategy
— Fund of Hedge Funds

Common Practices of Hedge Fund Managers:
- Use of Short Selling
- Employ Leverage
- Conduct Hedging
- Utilize Futures & Options
- Pursue Arbitrage
- Target Specific Markets
- Incorporate Position Limits
- Set Buy/Sell Targets
- Follow Stop-Loss Restrictions

Strategies that Target Opportunistic Situations Via Event-Driven Hedge Funds
- Distressed Securities
- Reasonable Value
- Merger Arbitrage
- Opportunistic Events