Foreword xi

Introduction: Goin’through Changes xv

Chapter One What Is a Hedge Fund?: The Traditional Long-Only Portfolio Versus the Alternative Hedge Fund Portfolio 1

Chapter Two The Parlor Cars of the Gravy Train: The Long and the Short of It 31

Chapter Three Accessing the Inaccessible: From the Elite to Main Street 55

Chapter Four Heads We Win; Tails You Lose: Eating Your Own Cooking While Enduring Symmetrical Glories and Punishments 71

Chapter Five The Alpha Game: In Search of El Dorado 85

Chapter Six Ironing Out Inefficiencies: Exploiting the Efficient Market Theory 101

Chapter Seven A Balancing Act: Outperforming the Market While Taking Less Risk 121

Chapter Eight Private Parts: Inside the Wild, Booming World of Private Equity (and More) 147

Chapter Nine If You Can’t Beat ’Em, Join ’Em: Hedge Fund Manager Selection and Due Diligence 175

Chapter Ten The Men Behind the Curtains: Fund of Hedge Funds 201

Chapter Eleven From Wall Street to Park Avenue: Setting Up Shop at the Hedge Fund Hotel 223

Conclusion: The Shape of Things to Come 243

Appendix: Due Diligence Questionnaire 249

Notes 255

Acknowledgments 261

Praise for
THE LITTLE BOOK OF HEDGE FUNDS

“This Little Book does a great job providing an insider’s perspective on the hedge fund industry and why they will always be an important part of a well-diversified portfolio.”
—LEE COOPERMAN, Chairman and CEO of Omega Family Office, former General Partner, Goldman Sachs

“In the second edition of The Little Book of Hedge Funds, Scaramucci demystifies the complexities of hedge funds with the wit and insight of an investment veteran, making an otherwise opaque world both accessible and engaging. Sharp, informative, and incredibly entertaining.”
—JOE DOWLING, Senior Managing Director and the Global Head of Blackstone Multi-Asset Investing (BXMA)

Ushering in over a decade of near-zero interest rates, the 2008 financial crisis changed the world of hedge funds forever. And as the post-COVID era reintroduced higher rates and higher inflation, many famous investment managers were washed away in the ensuing tsunami. A new regime was put in place and, with it, new rules and frameworks for successful operation came into being.

In the newly revised second edition of The Little Book of Hedge Funds, celebrated financier Anthony Scaramucci delivers yet another indispensable discussion of these exceedingly important—but poorly understood—investment vehicles. The author introduces how hedge funds came to grow to the size they are today, how a low interest rate era shaped behavior in this investing space, and how investors need to behave today to adapt to the return of higher rates and even higher inflation.

The book explains what you should look for from a hedge fund manager who’s returns will now be measured against a much higher risk-free rate. It also includes interviews with three legendary hedge fund investors about how they choose investment managers and how they decide who they can trust with their (substantial) assets. Finally, Scaramucci considers what the future might hold for the hedge fund industry and, more importantly, what that means for individual investors doing their best to earn a market-beating return in a challenging environment.

Perfect for novice investors, experienced financiers, and professionals working at financial institutions, The Little Book of Hedge Funds is a must-read resource that offers the tools and information you need to understand and invest in hedge funds.