This book gives a nice, general overview of different hedge fund strategies. It was published in 2006 with data going until end 2004, so some of the information is dated. There’s a section on mortgage-backed securities arbitrage, which was interesting to see through the lens of pre-2007. Stefanini actually mentions in the very end of the section that some HF managers believe there might be a bubble in the US real estate market…hindsight is 20/20. While CTAs and managed futures funds aren’t technically hedge funds, there’s a section included in them as some are structured and run like hedge funds and represent an important piece of the alternative asset management pie.
Most of the book is fairly dry and straightforward, simply because of the format and its intent to provide an overview of the hedge fund strategy universe. One small section which I found particularly interesting was 14.3 under Global Macro titled “The Characteristics Shared by Great Traders.” Rather than paraphrase it, I’ll post a small piece here:
Successful traders are not greedy and are not afraid; they have an in-depth knowledge of themselves and their minds. From a psychological point of view, we could say that they sublimate the survival instinct into their business, they fully identify with the fund they manage and are totally involved in its management, body and soul.
I feel this is why I myself am drawn to trading – trading is the ultimate test which reveals your personality and your mind’s inner workings while pushing you to let go of your most innate human traits and tendencies (greed, fear, etc.). The financial markets are a brutally clearcut, emotionless forum in which you can express your ideas on the world and you get instant feedback. In order to succeed, you must be completely aware of who you are, what you’re doing in the markets, and why you’re there. To be successful, as cheesy as it may sound, you must be so focused and committed to what you’re doing that you are “one” with your trading and management. This goes back to what George Soros said, that he constantly strives to have a “heightened state of awareness.” While I’m nowhere close to that stage yet, I feel I’m getting closer every day.
JL Nexus 