The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds

Image of The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds
Release Date: 
May 29, 2012
Wiley Business Books
Reviewed by: 

“. . . an absorbing paean to the hedge fund industry’s big winners.”

If you’re looking for ways to replicate the extraordinary experience of the ultra-successful hedge fund managers on which this work focuses, you won’t find them there.

What you will find are interesting and inspirational anecdotes from the masters of alpha, who have in various ways spectacularly outperformed benchmarks in their fund vehicles.

The Alpha Masters, compiled by a young journalist who has covered the hedge fund industry, is well written and presents absorbing insights into the industry’s superstars, as delivered by themselves, but doesn’t give much away about the secrets of their techniques beyond general strategies. The author’s financial experience has its limitations, but the reportage can be compelling.

The formula for the unparalleled success of this handful of 11 individuals, whose personal net worth would appear to amount to about 0.2% of the USA’s GDP, seems to boil down largely to a combination of luck, timing, conviction, and ego—along with a measure of market acumen. The managers interviewed are honest enough to share their investment mistakes as well as successes; and all come across as genuinely passionate about what they do.

The Alpha Masters is organized by chapters, each centered on a different manager or managers, starting with Ray Dalio, who has had phenomenal performance with his macro approach, but like others in the book has struggled to maintain this in a challenging 2012.

The next chapter recounts the somewhat odd combination of Man Group with GLG (short for “guys leaving Goldman”), but better stride is hit with John Paulson, whose big win was on the sub-prime housing crisis.

Subsequent chapters cover distressed strategies (Lasry and Gardner), shareholder activism (Ackman) and shorting (Chanos), among others.

The author’s access to these normally rather secretive managers is notable, but the account reflects a somewhat fawning approach with little critical assessment of these funds in relation to the larger financial system—it’s hardly surprising that those interviewed have been so cooperative.

Important questions about the role of these investments in the financial crisis and their contribution to an improved system going forward are not well answered. In that sense it’s little more than rags to riches stories of a privileged few who have attained extraordinary status, not without hard work, but with meaningful consequences (not universally positive) for world prosperity. For each of these mega-winners, there are millions of losers, and very few have access to the expertise of these demi-gods.

For financial advisers, there are interesting nuggets of information on client relationship and management, as well as the importance of liquidity and funding.

While the success of the alpha masters is proven, and the book has its inspirational moments, it is ultimately represents an absorbing paean to the hedge fund industry’s big winners.