Most of the characters in this book are familiar: Ray Dalio of Bridgewater Associates, Tim Wong and Pierre Lagrange of Man Group/AHL, John Paulson of Paulson & Co., Marc Lasry and Sonia Gardner of Avenue Capital Group, David Tepper of Appaloosa Management, William A. Ackman of Pershing Square Capital Management, Daniel Loeb of Third Point, James Chanos of Kynikos Associates, and Boaz Weinstein of Saba Capital Management. Adding to the luminaries, Mohammed El-Erian wrote the foreword and Myron Scholes the afterword.
Many of their stories are familiar as well. So why does this book remain a compelling read?
It introduces us to a very bright, hardworking, resilient group of people. We see how their research leads them to formulate hypotheses, how they translate these hypotheses into market positions, how they push their advantage, and how they bounce back when their hypotheses don’t pan out.
In chapter after chapter we begin to see what it takes to be an alpha master (or, as Scholes would have it with a nod to Ohm’s law, an omega master, “where omega is the varying amounts of resistance in the market”). It matters not where you start or what niche you carve out for yourself. But it matters enormously that you mold your fund to fit your own interests and expertise, that your research is relentless and subject to constant testing and potential revision, that you understand (and respect) risk. It matters that you can see things in available data that other people don’t, that you or your team have a set of skills that can offer a fresh perspective when weighing potential investments.
If your goal is to become a master investor/trader, this book may inspire you to work harder and smarter than you ever thought necessary.
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The bad and the good: Most hedge funds are an utter failure (hundreds folding every year), a joke and dishonest scam with outrageous fees and dismal returns. However, there are a few geniuses in the wasteland whose success cannot be explained by luck, and one should not broad-brush and judge everybody in the industry by its overwhelming mediocrity, just as I resent market timing being summarily dismissed as worthless just because most market timers fail, and the best practitioners are not recognized for their genuine skills.
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