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Hedge Fund Risk Fundamentals
Book

Hedge Fund Risk Fundamentals

Solving the Risk Management and Transparency Challenge

Richard Horwitz
Bloomberg Press, 2004

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Editorial Rating

8

Qualities

  • Innovative
  • Applicable

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.

Take-Aways

  • Hedge funds have very different risk profiles than other long equity investment funds.
  • Hedge fund risks typically include option risks, asymmetry and idiosyncratic risks.
  • Hedge fund management is also subject to quantifiable financial risk and various environmental and personality risks, like hubris, isolation and management shock.

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.

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