Hedge Fund Series

Introduction to Hedge Fund Series

For other parts in the series:

Part 1; What I Learned Working At A Hedge Fund

In the world of investing, hedge funds have an interesting reputation—they are well-known for producing vast riches and famous fund managers, but their actual operations are still cloaked in secrecy.  This mismatch gives rise to some obvious questions—How do they function? how do they make money? How did their founders become so wealthy? Most importantly for traders everywhere– could you or I become one of those fabulously successful individuals, like George Soros or Ray Dalio?

In this upcoming series, we are going to explore a few of these questions. First of all, hedge funds most definitely follow some of the most basic rules and tenets of investing. Arguably, they are a better expression of these than a lot of other investing structures. What we can learn from this alignment of interests?

One of the other things that strike me about hedge funds is how a host of them have proliferated with different strategies that each make money. Some are macro-oriented, trading currencies and interest rates around the world; the best examples would be George Soros or Paul Tudor Jones. Others are equities long/short specialists, buying undervalued stocks while shorting ones they deem overvalued securities; the best examples would be Daniel Loeb or Steve Cohen; a third category would be bond investors like Paul Singer or Marc Lasry. Indeed, there are almost as many strategies as there are investors.

What does this tell us? Any well-conceived and well-executed strategy can form the basis of a hedge fund’s investment process and strategy. As long as it obeys the fundamentals of good investing and is a well-executed process, then it can be a successful strategy and the foundation of a good hedge fund business.

You’ve made up your mind—you want to be a hedge fund guru. What qualities do you need? What do you need to develop? What can we learn from the existing ones? In this series, we’ll explore all of those questions and more.

As always, if there’s anything more that you want to see covered, then let me know.

By Bruce Bower | www.howoftrading.com | Twitter: @HowOfTrading




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