Active Management Reading List

Asset Management

 

Asset Management: A Systematic Approach to Factor Investing by Andrew Ang (New York: Oxford University Press, 2014). Presents an asset management model including factor risk premiums for different asset classes.

 

Expected Returns: An Investor’s Guide to Harvesting Market Rewards by Antti Ilmanen (Hoboken, NJ: John Wiley & Sons, 2011). The return drivers of the major asset classes.

 

Funds: Private Equity, Hedge, and All Core Structures by Matthew Hudson (Hoboken, NJ: John Wiley & Sons, 2014).  The types and structures of major investment funds.

 

Manias, Panics and Crashes: A History of Financial Crises (6th edition) by Charles P. Kindleberger and Robert Z. Aliber (New York: Palgrave Macmillan, 2011). The historical lessons and structure of speculative bubbles.

 

Hedge Funds

 

The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds by Maneet Ahuja (Hoboken, NJ: John Wiley & Sons, 2012). Profiles of activist and global macro hedge fund managers.

 

The Big Short: Inside the Doomsday Machine by Michael Lewis (New York: W.W. Norton & Company, 2010). How hedge fund managers extracted alpha from the 2007-09 global financial crisis.

 

The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund by Anita Raghavan (New York: Business Plus, 2013). Hedge fund manager Raj Rajaratnam and the demise of the Galleon hedge fund.

 

Confidence Game: How A Hedge Fund Manager Called Wall Street’s Bluff by Christine S. Richard (Hoboken, NJ: John Wiley & Sons, 2010). Hedge fund manager Bill Ackman and the MBIA fraud investigation.

 

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Perdersen (Princeton, NJ: Princeton University Press, 2015). Presents a framework for how hedge funds extract alpha (excess returns above a benchmark) using active management.

 

Fooling Some of the People All of the Time (rev. edition) by David Einhorn (Hoboken, NJ: John Wiley & Sons, 2010). The fallout from hedge fund manager Einhorn’s decision to ‘short’ Allied Capital.

 

The Fundamentals of Hedge Fund Management: How to Successfully Launch and Operate a Hedge Fund (2nd edition) by Daniel A. Strachman (Hoboken, NJ: John Wiley & Sons, 2012). The operational structure of hedge funds.

 

Hedge Fund Market Wizards: How Winning Traders Win by Jack D. Schwager (Hoboken, NJ: John Wiley & Sons, 2012). Interviews with successful hedge fund managers and traders.

 

Hedge Fund Masters: How Top Hedge Fund Traders Set Goals, Overcome Barriers, and Achieve Peak Performance by Ari Kiev (Hoboken, NJ: John Wiley & Sons, 2005). The performance psychology of hedge fund traders.

 

Hedge Funds: An Analytic Perspective by Andrew W. Lo (New Haven, CT: Princeton University Press, 2010). A quantitative finance model of how hedge funds work.

 

Hedge Hogs: The Cowboy Traders Behind Wall Street’s Largest Hedge Fund Disaster by Barbara T. Dreyfuss (New York: Random House, 2013). The demise of the Amaranth hedge fund.

 

Inside The House of Money: Top Hedge Fund Traders on Profiting in the Global Markets (rev. edition) by Steven Drobny (Hoboken, NJ: John Wiley & Sons, 2009). How hedge fund traders profited during the 2003-08 speculative bubble.

 

Investment Strategies of Hedge Funds by Filippo Stefanini (Hoboken, NJ: John Wiley & Sons, 2006). Common investment strategies of major hedge funds.

 

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money by Steven Drobny (Hoboken, NJ: John Wiley & Sons, 2011). How hedge fund traders risk hedged the 2007-09 global financial crisis.

 

The Little Book of Hedge Funds: What You Need to Know About Hedge Funds but the Managers Won’t Tell You by Anthony Scaramucci (Hoboken, NJ: John Wiley & Sons, 2012). An introduction by a hedge fund manager to hedge funds as an active management vehicle to extract alpha from financial markets.

 

More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby (New York: The Penguin Press, 2010). The history of hedge funds as an active management structure and biographies of hedge fund managers.

 

Risk Management in Trading: Techniques to Drive Profitability of Hedge Funds and Trading Desks by Davis W. Edwards (Hoboken, NJ: John Wiley & Sons, 2014). Risk management strategies used by major banks and hedge funds.

 

Trade Like a Hedge Fund: 20 Successful Uncorrelated Strategies & Techniques to Winning Profits by James Altucher (Hoboken, NJ: John Wiley & Sons, 2004). The strategies and techniques that Altucher developed whilst trading for Victor Niederhoffer.

 

Visual Guide to Hedge Funds by Richard C. Wilson (Hoboken, NJ: John Wiley & Sons, 2014). An introduction to hedge funds as an active management vehicle.

 

When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein (New York: Random House, 2001). The demise of the hedge fund Long-Term Capital Management.

 

Private Equity

 

Barbarians At The Gate: The Fall of RJR Nabisco by Bryan Burrough and John Helyar (New York: HarperBusiness, 2008). The market for corporate control of RJR Nabisco and the takeover’s ‘winners curse’.

 

The Fissured Workplace: Why Work Became So Bad For So Many and What Can Be Done to Improve It (Boston, MA: Harvard University Press, 2014). A labour / union critique of the asset management / private equity model and its impact on workers.

 

The Masters of Private Equity and Venture Capital: Management Lessons from the Pioneers of Private Investing by Robert A. Finkel with David Greising (New York: McGraw-Hill, 2010). Anecdotes about private equity and venture capital deals.

 

Private Equity: Fund Types, Risks and Returns, and Regulation edited by Douglas Cumming (Hoboken, NJ: John Wiley & Sons, 2010). Private equity’s investment fund and legal structure as a form of active management.

 

Private Equity At Work: When Wall Street Manages Main Street by Eileen Appellbaum and Rosemary Batt (New York: Russell Sage Foundation, 2014). Presents a justification for and evaluation of private equity as a form of active management.

 

The Private Equity Edge by Arthur B. Laffer, William J. Hass and Shepherd G. Pryor IV (New York: McGraw-Hill, 2009). A justification for private equity as a form of experimental innovation.

 

Private Equity Operational Due Diligence: Tools to Evaluate Liquidity, Valuation, and Documentation by Jason Scharfman (Hoboken, NJ: John Wiley & Sons, 2012). Presents a framework for operational due diligence of private equity as active management.

 

Private Equity Unchained: Strategy Insights for the Institutional Investor by Thomas Meyer (New York: Palgrave Macmillan, 2014). Presents a strategic model for private equity as arbitrage.

 

Sovereign Wealth Funds

 

Sovereign Wealth Funds: Legitimacy, Governance and Global Power by Gordon L. Clark, Adam D. Dixon, and Ashby H.B. Monk (Princeton, NJ: Princeton University Press, 2013). The fund structure and investment strategies of sovereign wealth funds.

 

Value Creation

 

The Alchemy of Finance: Reading the Mind of the Market by George Soros (New York: Simon & Schuster, 1987). Presents Soros’ theory of reflexivity about financial markets, influenced by philosopher Karl Popper.

 

Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb (New York: Random House, 2012). An optionality-based philosophy of how to actively deal with luck, risk, and uncertainty.

 

Den of Thieves by James B. Stewart (New York: Touchstone, 1992). How financier Michael Milken helped to create the high yield bond / junk bond trade and caused the downfall of Drexel Burnham Lambert.

 

Learn Or Die: Using Science to Build a Leading-Edge Learning Organization by Edward D. Hess (New York: Columbia University Press, 2014). How the hedge fund Bridgewater creates a Radical Transparency culture for value creation.

 

Moneyball: The Art of Winning an Unfair Game by Michael Lewis (New York: W.W. Norton & Company, 2003). How baseball coach Billy Beane used Bill James’ sabermetrics – the statistical study of baseball performance – to transform the Oakland A’s team.

 

More Than You Know: Finding Financial Wisdom In Unconventional Places (rev. edition) by Michael J. Mauboussin (New York: Columbia University Press, 2008). How to find and extract alpha from financial markets using lessons from psychology and science.

 

The Nature of Value: How to Invest in an Adaptive Economy by Nick Gogerty (New York: Columbia University Press, 2014). Presents a value creation model used by the hedge fund Bridgewater.

 

Plutocrats: The Rise of the Global Rich and the Fall of Everyone Else by Chrystia Freeland (New York: The Free Press, 2012). The geopolitical worldview of contemporary business and financial elites.

 

The Predators’ Ball: The Inside Story of Drexel Burnham and the Rise of the Junk Bond Traders by Connie Bruck (New York: Penguin Books, 1989). How financier Michael Milken’s deal flow enabled him to take control of Drexel Burnham Lambert.

 

Putin’s Kleptocracy: Who Owns Russia? by Karen Dawisha (New York: Simon & Schuster, 2014). How Putin’s regime in Russia dealt with the oligarchs, and engaged in institutional capture and value appropriation of Russian state assets for private gain.

 

The Snowball: Warren Buffet and the Business of Life by Alice Schroeder (New York: Bantam Books, 2008). The authorised biography of value investor Warren Buffett.

 

Security Analysis (6th edition) by Benjamin Graham and David Dodd (New York: McGraw-Hill, 2008). The influential primer on value investing.

 

Steve Jobs by Walter Isaacson (New York: Simon & Schuster, 2011). The authorised biography of Apple’s co-founder Steve Jobs.

 

Why Moats Matter: The Morningstar Approach to Stock Investing by Heather Brilliant and Elizabeth Collins (Hoboken, NJ: John Wiley & Sons, 2014). Morningstar’s ‘economic moats’ framework for value creation.

 

Venture Capital

 

The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies (2nd edition) by Mahendra Ramsinghani (Hoboken, NJ: John Wiley & Sons, 2014). Interviews with venture capital practitioners on deals and term sheets.

 

Deal Terms: The Finer Points of Venture Capital Deal Structures, Valuations, Term Sheets, Stock Options, and Getting Deals Done by Alex Wilmerding (Eagan, MN: Thomson Reuters / Aspatore, 2005). Term sheets, deal structures, raising capital, and legal structures for private equity and venture capital deals.

 

Term Sheets & Valuations: A Line by Line Look at the Intricacies of Term Sheets & Valuations by Alex Wilmerding (Eagan, MN: Thomson Reuters / Aspatore, 2006).

 

Venture Capital: Investment Strategies, Structures, and Policies edited by Douglas Cumming (Hoboken, NJ: John Wiley & Sons, 2010). Venture capital’s investment fund and legal structure as a form of active management.

 

Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist (2nd edition) by Brad Feld and Jason Mendelson (Hoboken, NJ: John Wiley & Sons, 2012). The legal structure and term sheets for venture capital deals.

 

Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel with Blake Masters (London: Virgin Books, 2014). The PayPal co-founder and Facebook / SpaceX investor presents a venture capital model of value creation.

What I’m Reading: Momentum Investing & Hedge Fund Strategies

This week I did some research program planning on hedge funds as strategic subcultures. Some recent material:

 

1. AQR Capital Management focuses on the momentum anomaly as an investment strategy (PDF).

 

2. The investor information for Goldman Sachs Asset Management LP contains some useful information (PDF).

 

3. AQR’s Cliff Asness and index fund pioneer Jack Bogle have a great discussion on active / passive management and pension fund investing.

 

4. BlackRock’s guide to Absolute Return investment strategies (PDF).

 

5. Nassim Nicholas Taleb talks with James Altucher about anti-fragility and uncertainty.

 

6. Slate’s John Swansburg dissects the American myth of the self-made man.

 

7. Wagner Award 2014 submissions to the National Association of Active Index Managers.

 

8. Trend-follower Michael Covel asks: Does momentum investing work?

 

9. Patrick O’Shaughnessy on two ways to improve the momentum strategy.