Your Essential Guide to Quantitative Hedge Fund Investing

This wise and lucid treatise explaining the promise and the hazards of alternative hedge fund strategies should be required reading for both investors and students of financial engineering.

-Burton G. Malkiel, author of A Random Walk Down Wall Street, 50th anniversary edition.

The book covers both the classical works and recent advances in quantitative aspects of hedge fund investing. Broad in scope and commendable in erudition, the book easily earns a prime spot on hedge fund allocator’s proverbial book shelf. Particular focus is rightfully paid to the portfolio construction aspects of hedge fund investing, alpha/beta separation of hedge fund returns, and persistence of those returns more generally. Personal stories covered among other material are a nice touch and make the whole book even more fun to read. In all, a welcome and long overdue addition to the professional literature on this thorny but relevant subject matter.

-Alexander Rudin, Ph.D., Global Head of Multi-Asset and Fixed Income Research as State Street Global Advisors.

Molyboga and Swedroe have produced a comprehensive guide to the theory and practice of hedge fund investing. From strategy and manager selection to portfolio construction, the book offers rigorous and pragmatic advice. I wish this book existed when I was starting out.

-Tobias Carlisle, Managing Director, Acquirers Funds.

This book covers a vast range, from classic topics of hedge fund performance sources, biases, and persistence, to smartly constructing hedge fund portfolios, to newer topics like diversity. Wonderful practitioner and expert interviews bring further flesh and color to the subject. I wish I had read this before I wrote my own books.

-Antti Ilmanen, Principal, AQR Capital.

Molyboga and Swedroe provide a comprehensive and insightful guide to quantitative investing in hedge funds. They explain carefully and lucidly all the technical details of this important area of investing. For each topic, they provide an excellent account of both the empirical evidence and the theory, based on results from the most recent academic research. This book provides the definitive cutting-edge guide for graduate students and investment professionals who wish to acquire a broader and deeper understanding of hedge fund investing. If you are going to read one book on hedge funds, you should read this one.

-Raman Uppal, Professor of Finance, EDHEC Business School.

The title doesn’t do this book justice. It’s about much more than quantitative hedge fund investing. It also discusses general manager and factor selection, whether performance persists, risk parity vs. traditional investing, even cutting edge topics like machine learning and important less quantitative topics like inclusion and diversity. In particular the interview section of the book was exceptionally informative save the one negative being that I was not an interviewee :) We will correct that in the next edition. The authors tackle this wide range of topics with their typical thoroughness and insight and I recommend this book whole-heartily if you’re interested in the titled subject or just good investing in general.

-Cliff Asness, Managing and Founding Principal, AQR Capital Management.

A very thorough guide on hedge funds from a refreshing allocator’s perspective. Unlike the many books on hedge funds that take the fund manager’s point of view and inevitably fall short on details for obvious secrecy reasons, this book gets deep into the data and modeling. The allocator’s perspective, and this book in particular, would be my choice for a business school course on hedge funds.

-Michael W. Brandt, Kalman J. Cohen Professor of Finance, Fuqua School of Business, Duke University.

Finally, a comprehensive guidebook to systematic hedge fund investing that bridges the gap between academic research and the real-world practice of asset management. The authors do a great job de-mystifying popular trading strategies and the statistical tools behind them, zeroing in on the key problem: distinguishing investing skill from luck is fiendishly hard. The "human" side of the book in the form of interviews with practitioners exhibiting a wide diversity of backgrounds and experiences brings a refreshing new perspective on the opaque world of hedge fund investing.

-Nikolai Roussanov, Moise Y. Safra Professor of Finance, Wharton Business School, University of Pennsylvania.

I learned a lot from this book. There are cautionary histories of hedge funds’ successes and failures, an impressively thorough review of the research on hedge fund performance, and engaging personal stories of hedge fund managers. Each chapter is followed by succinct "key takeaways." My grand takeaway is that investing in hedge funds is complex enough that I would not attempt to find a select set of them for my portfolio without the help of a wise, knowledgeable, and trusted advisor.

-Edward Tower, Professor of Economics, Duke University.

Hedge funds benefit from a mystique supported by perceptions of exclusivity and outsize performance available only to institutions and wealthy investors. This book takes a much-needed clear eyed approach to evaluating the portfolio value of hedge funds. Backed by dozens of academic studies, the authors provide a realistic evaluation of the headwinds faced by hedge funds hoping to provide value in a market filled with smart traders and barriers to persistence. I know of no other book that provides an equally exhaustive evaluation of the methodologies used to evaluate whether hedge funds are able to improve performance, and whether skilled advisors can select managers that provide value.

-Michael Finke, Frank M. Engle Chair of Economic Security at The American College.

As someone who teaches quantitative investing, this book is a wonderful resource for practical insight on quantitative methods in investing. Covering a wide range of topics that include portfolio construction, performance evaluation (and its biases), discretionary versus systematic funds, and newer topics on diversity, this book offers a wealth of information and tools for applying quant methods in finance. A wonderful resource for students and practitioners.

-Toby Moskowitz, Dean Takahashi Professor of Finance at Yale University and AQR Principal.

Well-researched and easy to read, this book is a must-read for all investors considering alternative investments. Grab a copy!

-Wesley R. Gray, PhD, CEO of Alpha Architect.