Summary of Hedge Fund Risk Fundamentals

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Rating

8 Overall

9 Applicability

8 Innovation

8 Style


Recommendation

Hedge funds are complex, risky investment vehicles. Other funds, such as most equity mutual funds, have straightforward investment strategies. By contrast, equity-oriented hedge funds may engage in various trading practices and investment strategies. They may be short funds, long-short funds or market neutral funds. And equity-oriented hedge funds are only a small sliver of the hedge fund universe. Thus, assessing the risk of hedge funds is a challenge. In language intelligible to most lay readers, author Richard Horwitz lays out the issues to consider when evaluating hedge fund risks. He has accomplished a great deal merely by writing this in readable prose, instead of in equations. He also explains his company’s hedge fund risk measurement system. getAbstract believes every hedge fund manager and anyone who even thinks of investing in a hedge fund should read this book.

In this summary, you will learn

  • The basics of hedge fund risk;
  • Why it is hard to measure;
  • Which new system may help; and
  • How you should think of hedge fund risk.
 

About the Author

Richard Horwitz is senior vice president and director of risk management and performance analytics at Kenmar Global Investment Management Inc., a fund of hedge funds located in Greenwich, Connecticut, and a frequent contributor to Risk magazine.

 

Summary

Acknowledge Volatility
Volatility is the result of uncertainty. Uncertainty and risk are closely related. Risk is, in fact, the variability of returns around a fixed reference point. An investor might be willing to pay $10 this month to receive a sure and certain $11 next month. The same...

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