Wilson, The Hedge Fund Book

Richard C. Wilson’s The Hedge Fund Book: A Training Manual for Professionals and Capital-Raising Executives (Wiley, 2010) is a meat and potatoes how-to book for hedge fund managers and wannabe managers. Although it covers a range of topics, its primary focus is on what it takes to set up and run a hedge fund as a business. The extensive use of interviews with representatives from the industry keeps the tone of the book conversational.

Wilson’s strength is marketing. It’s fascinating to see not only how he suggests hedge funds should market themselves, especially to raise capital, but how he markets himself and his assorted businesses. He follows the SKAR formula (specialized knowledge + authority + results = huge growth opportunities and faster development within your career or business). Here are some bullet points under establishing yourself as an authority in your niche area: (1) Publish your own newsletter or blog. (2) Interview one professional each month for your newsletter or blog. (3) Self-publish a short book based on what you have written for your newsletter or blog. (4) Speak at conferences.

There’s little talk about actual trading in the book, but one of the interviewees offered his four top pieces of trading advice. (1) Risk management is everything. (2) Understand behavioral finance. (3) Keep a detailed trading log. (4) For quantitative traders, “fit the security to the model, not the model to the security.” (p. 88)

The Hedge Fund Book (and note the tone of authority even in the title) should be useful for anyone who wants to launch a hedge fund. Even for those of us without such ambitions it’s an interesting read. It certainly dispels any illusions that all one needs to be a successful hedge fund manager is a winning trading strategy!