What Hedge Funds Really Do: An Introduction to Portfolio Management

by Philip J. Romero, Tucker Balch

When I managed a hedge fund in the late 1990s, computer-based trading was a mysterious technique only available to the largest hedge funds and institutional trading desks. We've come a long way since then. With this book, Drs. Romero and Balch lift the veil from many of these once-opaque concepts in high-tech finance. We can all benefit from learning how the cooperation between wetware and software creates fitter models. This book does a fantastic job describing how the latest advances in financial modeling and data science help today's portfolio managers solve these greater riddles. -Michael Himmel, Managing Partner, Essex Asset Management I applaud Phil Romero's willingness to write about the hedge fund world, an industry that is very private, often flamboyant, and easily misunderstood. As with every sector of the investment landscape, the hedge fund industry varies dramatically from quantitative "black box" technology, to fundamental research and old-fashioned stock picking. This book helps investors distinguish between these diverse opposites and understand their place in the new evolving world of finance. -Mick Elfers, Founder and Chief Investment Strategist, Irvington Capital

Genres: Finance, Business, Nonfiction, Economics, Mathematics, Computer Science, Technology

146 pages, Paperback

First published January 1, 2014

Reviews

[Christopher · Rating 3 out of 5]

could have been more concise but it did help me build a foundational understanding of trading

[Nick Davila · Rating 4 out of 5]

Read like 85% of it for a class. Pretty good I’m sure there’s more in depth or engaging material elsewhere but I enjoyed the parts I read 🤷‍♂️

[Marcin · Rating 3 out of 5]

I am a vivid fan of the Coursera MOOC platform. While all the courses available at coursera.org are free of charge (at least in the basic form), in some cases their authors try doing some kind of promotion for their books (which are usually somehow associated with the content of the course). This was the case for "What hedge funds ...".

Definitely when you read this book as an accompanying text for the "Computational finance" course it does provide You with deeper insight into the course material. While the course covers mostly the details of the financial calculations, the wider understanding of this area is left out. In such case this book is an invaluable addition to the learning experience. When you try to read this book as a self-containing text you might easily get bored just because you are separated from the real-life examples. As a result of this that book got only 3 stars from me.

[Chris Esposo · Rating 3 out of 5]

Although I had this book as part of a reading list for a graduate level course on algorithmic trading, I found the subject-matter/context enjoyable enough to read through in it's entirety. To be sure, this is by no means an "exhaustive" nor an "authoritative" text on the subject matter of hedge-funds. However, the author did not intend this text to serve this case. Instead, the book serves as a nice clean , and quick introduction to the world of trading, with an especial focus on the mechanics of trading, such that a technical individual (say a computer scientist) could start to build tools, write algorithms, and construct simulations in the subject-matter with some context and purpose.

In this view, the book's organization is simple enough, provide background to an area (say portfolio construction, order-books, arbitrage, etc.), so that the step-wise process of the thing is understood. Then, presumably the computer scientist can then recreate that thing in computer environment and execute it. Very much like a basic CS/math problem. The book also covers other topics relevant "standard" topics in active-management funds, including valuations, EMH, and the law of active portfolio management. None of these topics are covered in any real depth (say a few pages each). Yet, enough of the notion is provided for one to read further (or stop if their purpose is to just get the essentials).

For my course, more focus was put on the algorithms themselves, and learning the structure of them, so we had a separate standard text on machine learning as reference. However, I appreciate this book for what it is. The one thing that people should know is it's a bit dated circa 2013-14, being published right before Michael Lewis published his famous book "Flash Boys" on frontloading with strategic locations for fiber-networks, and that topic is very briefly covered in the last few pages of the text. Perhaps an updated version would be appropriate.

All in all, I would recommend this as a light-reference to a course, either for computing or technical domain person who wants to learn more about finance and/or trading.

[Jonathan Garvey · Rating 3 out of 5]

It was a good introduction, but maybe a little too basic when measured against a claim in the Abstract - that this book can be aimed at ‘software specialists interested in applying their skills to programming trading systems’. This is a false statement, as there’s nothing in this book for software specialists, period.

If you know absolutely nothing about finance, this could be beneficial. Do not read it expecting any practical enhancements to your algorithmic trading skills.

[Carina Cai · Rating 4 out of 5]

Was supposed to read it as a recommended text for a course within the first 2 weeks of the quarter, but I ended up reading it afterwards. It gives a clear and vivid introduction to portfolio management, and for me, served as a nice recap of the course. Not sure how the course or the book will help me with my own investment, but time will tell :)

[Dash]

Good introductory book for understanding basic concepts in investment markets. This will not teach you how to do quantitive trading, but it gives you an idea of what this job looks like and what you should look into if you are serious about it.

[Abhishek Aarush · Rating 4 out of 5]

An intro to the functioning of hedge fund would be an apt title

I think this a good book for beginners who want to learn what hedge funds are, how they work and someways in which they make money

[Faisal · Rating 3 out of 5]

A great easy introduction to hedge funds and related portfolio theory.

[Kasen · Rating 3 out of 5]

Decent introduction into finance and investing.

[Alex · Rating 3 out of 5]

Decent intro book, with emphasis on "intro"

[M · Rating 4 out of 5]

Apart from the formatting which is really substandard, the books gives a pretty good introduction to technical aspects of portfolio management

[Navid M · Rating 4 out of 5]

essentially a great starting place for individuals who are interested in understanding how the stock market works

[Woo · Rating 5 out of 5]

Somewhat simplified but, a really easy way to get a good idea on what quants do.

[Victor · Rating 3 out of 5]

Very basic introduction of what hedge funds do, I read this book as part of the Udacity course Machine Learning for Trading