Hedge Funds, Humbled: The 7 Mistakes That Brought Hedge Funds to Their Knees and How They Will Rise Again by Ganshaw, Trevor;

Short description:

The fall and rise of a trillion-dollar industry

Among the crown jewels of the investment world, hedge funds lost more than $600 billionin 2008. Still, says industry insider Trevor Ganshaw, a partner at a multi-strategy hedgefund, these investments continue to offer terrific investing opportunities.

Hedge Funds Humbled explores the seven mistakes that brought hedge funds to their knees—including excessive leverage, poor risk management, illiquid investments, and fraud. It thenoffers an outlook on the future of the hedge fund industry and the opportunities it still hasto offer. Hedge Funds Humbled explains:

• How The hedge fund industry operates
• Why it was nearly destroyed almost overnight
• What potential investors should look for to make profits—and avoid disaster

Ganshaw offers invaluable advice on how to spot the good funds and identify those withhigh fraud potential. He argues that as the hedge fund herd thins out, quality investmentopportunities will increase, and we will see much-needed improvements in risk managementand fund governance.

Relating one of the most dramatic financial stories in recent history, Hedge Funds Humbledis an eye-opening look at an industry that may have yet to reveal its true potential.

Long description:

The fall and rise of a trillion-dollar industry

Just three years ago, hedge funds were at thetop of the investment world. Years of unparalleledgrowth had pushed assets to nearly$3 trillion. Leverage was used so aggressivelythat total long and short investments approachedan astonishing $10 trillion. Thousandsof new funds had sprouted in every corner ofthe market, and managers, enjoying an almostunimaginable pool of fees, were dubbed thenew “masters of the universe.”

Then came 2008.The industry suffered itsworst performance ever, losing $600 billionor roughly 20% in a single year. Multibilliondollarhedge funds collapsed overnight, epicfrauds were revealed, and assets plummetedas spooked investors scrambled to get theirmoney back.

The near collapse of the industry is one of themost dramatic stories of the global economicmeltdown. It’s also among the most instructive—because hedge funds are still alive and,if managed wisely, will emerge stronger thanever in the coming years.

In Hedge Funds Humbled, industry insiderTrevor Ganshaw provides a detailed primerof the industry and explains how the peoplewho earned more than $100 billion in feesduring their short but happy heyday plantedthe seeds of their own destruction. He paintsa vivid picture of how the industry leaders’major mistakes destroyed hundreds of billionsof investor capital; Ganshaw calls them the“seven deadly sins” of the hedge fund industry:

• Out-of-control leverage
• Inadequate risk management
• Flawed fee structures
• Overcrowded strategies
• The Peter Principle oftoo much capital
• Capital instability
• Fraud, enabled by lax controls

Ganshaw examines the future of the industryand shows investors what to look for and whatto avoid. There’s still money to be made inhedge funds and, in his estimation, the industryis poised for a comeback. “As all goodhedge fund managers know, greed is good,”he writes. “Humility, it seems, may now be anessential part of keeping it that way.”

More dramatic than fiction, Hedge FundsHumbled is a timely work that provides a criticallook at an industry gone bad—and an optimisticlook at its future.

The fall and rise of a trillion-dollar industry

Just three years ago, hedge funds were at thetop of the investment world. Years of unparalleledgrowth had pushed assets to nearly$3 trillion. Leverage was used so aggressivelythat total long and short investments approachedan astonishing $10 trillion. Thousandsof new funds had sprouted in every corner ofthe market, and managers, enjoying an almostunimaginable pool of fees, were dubbed thenew “masters of the universe.”

Then came 2008.The industry suffered itsworst performance ever, losing $600 billionor roughly 20% in a single year. Multibilliondollarhedge funds collapsed overnight, epicfrauds were revealed, and assets plummetedas spooked investors scrambled to get theirmoney back.

The near collapse of the industry is one of themost dramatic stories of the global economicmeltdown. It’s also among the most instructive—because hedge funds are still alive and,if managed wisely, will emerge stronger thanever in the coming years.

In Hedge Funds Humbled, industry insiderTrevor Ganshaw provides a detailed primerof the industry and explains how the peoplewho earned more than $100 billion in feesduring their short but happy heyday plantedthe seeds of their own destruction. He paintsa vivid picture of how the industry leaders’major mistakes destroyed hundreds of billionsof investor capital; Ganshaw calls them the“seven deadly sins” of the hedge fund industry:

• Out-of-control leverage
• Inadequate risk management
• Flawed fee structures
• Overcrowded strategies
• The Peter Principle oftoo much capital
• Capital instability
• Fraud, enabled by lax controls

Ganshaw examines the future of the industryand shows investors what to look for and whatto avoid. There’s still money to be made inhedge funds and, in his estimation, the industryis poised for a comeback. “As all goodhedge fund managers know, greed is good,”he writes. “Humility, it seems, may now be anessential part of keeping it that way.”

More dramatic than fiction, Hedge FundsHumbled is a timely work that provides a criticallook at an industry gone bad—and an optimisticlook at its future.

Table of Contents:

1. The dawn of the hedge fund industry
2. The key players
3. The factors behind the industry's extraordinary trillion dollar growth
4. The Seven Deadly Mistakes
5. Greed
6. Extreme leverage
7. Poor risk management
8. The hedge fund "Peter Principle"
9. The instability of equity capital
10. Illiquid investments
11. Fraud
12. Avoiding the Mistakes