Hedge Fund Analysis

418 Pages·2012·2.61 MB·English

by  Frank J. Travers

Hedge Fund
Analysis
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Hedge Fund
Analysis
An In-Depth Guide to Evaluating Return
Potential and Assessing Risks
FRANK J. TRAVERS, CFA
John Wiley & Sons, Inc.
Copyright(cid:2)c 2012byFrankJ.Travers.Allrightsreserved.
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LibraryofCongressCataloging-in-PublicationData:
Travers,FrankJ.
Hedgefundanalysis:anin-depthguidetoevaluatingreturnpotentialandassessingrisks/
FrankJ.Travers.–1sted.
p.cm.–(Wileyfinance;778)
Includesindex.
ISBN978-1-118-17546-0;ISBN978-1-118-22710-7(ebk);ISBN978-1-118-23756-4(ebk);
ISBN978-1-118-26474-4(ebk)
1.Hedgefunds.2.Riskmanagement.I.Title.
HG4530.T6952012
332.64’524–dc23 2012010597
PrintedintheUnitedStatesofAmerica
10987654321
I dedicate this book to my wife Tara and my children,
Brendan, Sean, and Lauren.
My writing skills are insufficient to properly describe how
much I love and am inspired by each of you. Thank you for
bringing such joy to my life.

Contents
Introduction xi
PARTONE
Background
CHAPTER1
HedgeFundHistory 3
SoWhoInventedtheHedgeFund? 4
TheSamurai 4
TheAcademic 5
TheLegend 14
TheInnovator 17
CHAPTER2
HedgeFundAssetClass 29
Definition 29
HedgeFundStructure 31
HedgeFundStrategies 32
AdvantagesofAllocatingtoHedgeFunds 43
HedgeFundSizeandAgeImpactsPerformance 52
PARTTWO
HedgeFundDueDiligence
CHAPTER3
DueDiligenceProcess 57
KeyAreasofFocuswithinEachComponentofDueDiligence 57
TheDueDiligenceProcessHighlightedinThisBook 60
vii
viii CONTENTS
PuttingItAllTogether 67
SomeInitialThoughts 70
CHAPTER4
InitialDataCollection 77
DataCollection 78
DueDiligenceQuestionnaire(DDQ) 80
FictionalCapitalManagement 80
OtherMaterials 106
FurtherAnalysis 108
13FAnalysis 116
HedgeFundJournal 119
CHAPTER5
InitialInterview 121
InitialCallorMeeting 121
PhoneInterviews 122
MeetingNotes 139
CHAPTER6
QuantitativeAnalysis 145
PerformanceMeasures 146
AbsoluteReturnMeasures 146
AbsoluteRiskMeasures 154
Regression-BasedStatistics 164
PeerGroupAnalysis 168
CHAPTER7
PortfolioAnalysis 173
AttributionAnalysis 174
FundamentalAnalysis 189
EvaluatingPortfolioData 193
CHAPTER8
OnsiteInterviews 217
OnsiteMeetingStrategies 219
One-on-OneMeetings 219
MeetingwithMoreThanOnePerson 222