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When it first came out in 2000, this edited collection was a solid book on hedge funds. Now in its second edition, the book is even better. It has been so extensively rewritten that it is practically a new book. Of it's 23 chapters, 10 are entirely new, 12 have been rewritten, and only one is the same as it was in the first edition. The book will appeal to all professionals who work with hedge funds, but especially sophisticated institutional investors. While it is non-technical, neither is it elementary. It targets readers with prior experience in investment management and some knowledge of hedge fund investing. The book is divided into four parts with chapters focusing on different aspects of hedge funds. Some provide an investors perspective. Some provide a managers' perspective. Others present a fund-of-fund or counterparty dealer's perspective. Operational, regulatory and legal issues are also addressed. There is plenty of information on hedge fund indexes—their uses, biases and limitations. The only glaring omission is the lack of a chapter on prime brokers. Those relationships are important and pose conflicts. They are subject to abuses and should be discussed in a book like this. Overall, chapters are excellent. Only a few are weak. One on operational risk describes the new Basel Accord in detail but neglects to mention that hedge funds aren't subject to the accord! I really like the chapter on convertible arbitrage, which delves into the complex exposures these strategies entail and has sophisticated information on pricing methodologies. An appendix delves into all the financial engineering. Another nice chapter on mortgage-backed strategies goes beyond the basics and identifies unique and unexpected risks. Such quality chapters are the norm. This shouldn't be the first book you read on hedge funds, but if you pair it with an introductory book like McCrary (2002), Lhabitant (2002) or Ineichen (2002), you should have a winning combination. |
How does the book compare with Schachter (2004)? Both books are edited collections that I would recommend reading after you read a more introductory text. Other than that, they are quite different. Schachter is slightly more sophisticated and certainly more cautionary about hedge funds. Issues like liquidity risk, skewed return distributions and value-at-risk are emphasized. Parker is more enthusiastic about hedge funds and emphasizes how they are benchmarked, the asset allocation opportunities they present, and how they manage the risks associated with particular trading strategies. For more sophisticated readers, the two books complement each other. [10/11/05]
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