Getting Started in Hedge Funds: From Launching a Hedge Fund to New Regulation, the Use of Leverage, and Top Manager Profiles, 3rd Edition

Acknowledgments viii

Introduction Why Hedge Funds Now and Forever? xi

Chapter 1 Hedge Fund Basics 1

The Near Collapse of Long-Term Capital Management 4

The Credit Crisis and Hedge Funds 13

A Brief History of Hedge Funds 17

The Current State of the Hedge Fund Industry 21

Alfred Winslow Jones—The Original Hedge Fund Manager 24

Chapter 2 How Hedge Funds Operate 33

Starting a Hedge Fund 36

Hedge Fund Regulations and Structures 53

How Hedge Funds Use Leverage 62

Patriarchs of the Hedge Fund World 62

Hedge Funds Take All the Heat 66

George Soros—The World’s Greatest Investor 68

Chapter 3 The Managers 71

Guy Wyser-Pratte—Wyser-Pratte 74

Bill Michaelcheck—Mariner Investment Group 80

Nancy Havens—Havens Advisors LLC 85

Steve Cohen—SAC Capital 89

Chapter 4 Hedge Fund Investing 95

The Role of an Investment Adviser 98

An Institutional Investor 99

Third-Party Marketers 103

An Individual Investor 105

A Consulting Firm 108

A Manager of Managers 111

Conclusion 117

Appendix A Hedge Fund Strategies 121

Appendix B Example of Material Included in an Onshore Document 125

Overview 125

Important General Considerations 128

Summary of Offering and Partnership Terms 130

Management 146

Appendix C Example of Material Included in a Cayman-Based Fund for Tax-Exempt Investors 149

Part 1: Establishing an Offshore Fund Domiciled in the Cayman Islands 149

Part 2: Summary of Key Disclosures for Cayman Islands Offering Document 154

Glossary 161

Notes 171

About the Author 175

Index 177