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Top Hedge Fund Managers: They Aren’t Wizards, But They Are Alpha Masters

Top Hedge Fund Managers: They Aren’t Wizards, But They Are Alpha Masters via  Christopher Faille, AllAboutAlpha.com

Maneet Ahuja is going head-to-head with Jack D. Schwager, and his “wizards” books, in this new volume from Wiley. Though some of the resulting book will seem familiar, on the whole it is worth a look.

Ahuja, a producer for CNBC’s Squawk Box, offers nine case studies, one chapter each, on the “alpha masters” who find their own “wildly unique” ways to outperform the broader market. These studies are packaged with her own brief introductory reflections, a foreword by Mohamed A. El-Erian, and an Afterword by Nobel Prize winner Myron S. Scholes.

And there’s no reason Schwager should forever have a monopoly on this sort of collection.

Ford’s Bank Debt

The standout essay for me covers Marc Lasry and Sonia Gardner, of the Avenue Capital Group. This is the brother-sister pair that founded Avenue in 1995 and that has taken a leading role in the distressed debt space in the 20 years since. Their story gives us a perspective on the re-building of the U.S. auto industry after the global financial crisis.

Avenue Capital started aggressively buying Ford’s senior secured bank debt in the transition period between the Bush and Obama presidencies. It was typical of Avenue that it stuck to the top of the capital structure of the company.

Ahuja quotes Lasry saying that they may not have bought this debt at the absolute bottom, but this doesn’t bother him. He doesn’t believe in timing the market. “We invest when we have conviction in the credit and we believe it’s cheap. If it gets cheaper, then we buy more.”

Avenue sold its Ford positions about a year later, with a profit that made 2009 one of the best annual performances in the history of Avenue’s U.S. funds.

Ahuja’s account is clear and informative both on the Ford deal and on another (more recent) Avenue coup, involving the amusement-park company Six Flags.

What is the division of labor between brother and sister? As Ahuja describes it: brother runs the front office, sister runs the back. Quoting Gardner, “I think some funds don’t place enough importance on establishing institutional-quality infrastructure – in terms of accounting, compliance, legal, investor relations, and information technology capabilities.”

The Pennsylvania Public School Employees Retirement System, which (under director Charles Spiller) started investing in Avenue in late 2000, is a contented institutional investor. Spiller praises Avenue’s “conservative utilization of debt – they really don’t lever their portfolio,” he said, so their investors never get the impression that they’re panicking.

See full article here.

The Alpha Masters – Description

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

The ultimate behind-the-curtain look at the hedge fund industry, unlocking the most valuable stories, secrets, and lessons directly from those who have played the game best.

Written by Maneet Ahuja, the hedge fund industry insider, The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds brings the secretive world of hedge funds into the light of day for the first time. As the authority that the biggest names in the business, including John Paulson, David Tepper, and Bill Ackman, go to before breaking major news, Ahuja has access to the innermost workings of the hedge fund industry. For the first time, in The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds, Ahuja provides both institutional and savvy private investors with tangible, analytical insight into the psychology of the trade, the strategies and investment criteria serious money managers use to determine and evaluate their positions, and special guidance on how the reader can replicate this success themselves.

There are few people with access to the inner chambers of the hedge fund industry, and as a result it remains practically uncharted financial territory. Alpha Masters changes all that, shedding light on star fund managers and how exactly they consistently outperform the market.

The book:

  • Contains easy-to-follow chapters that are broken down by strategy—Long/Short, Event Arbitrage, Value, Macro, Distressed, Quantitative, Commodities, Activist, pure Short, Fund of Funds
  • Includes insights from the biggest names in the trading game, including Ray Dalio, Marc Lasry, Jim Chanos, Sonia Gardner, Pierre Lagrange, and Tim Wong
  • Features contributions from industry icon Mohamed El-Erian

Many of the subjects profiled in this groundbreaking new book have never spoken so candidly about their field, providing extremely provocative, newsworthy analysis of today’s investing landscape.

The Alpha Masters – Review

“This is one of the very few books I know of that crawls inside the minds of today’s most brilliant investors to get the play-by-play of their best (and sometimes worst) investments. You feel as though you are sitting across from the likes of John Paulson and David Tepper as they share their most sought-after techniques and analysis. This book will pay for itself and then some for those who are smart enough to pick it up.” – Nouriel Roubini, Cofounder and Chairman, Roubini Global Economics, Professor of Economics, NYU Stern School of Business

“Maneet Ahuja knows well the stars of the hedge fund universe. She has written a really very interesting book that provides insights into the industry, its rapid evolution, and its adaptability to a constantly shifting investment landscape. But, most of all, she introduces us to its fascinating leaders, in depth. From their backgrounds, values, and modes of thought, she gives us insight into what it takes to be successful in this most demanding profession.” – Michael Spence, 2001 Nobel Laureate in Economics, former Dean of Stanford Business School

“Hedge funds carry a range of connotations for investors, both good and bad. Maneet’s demystification of this increasingly important sector of the financial world provides a valuable service for investors, as they look for alternatives to the financial institutions—and investing tenets—that failed them during the financial crisis.” – Sallie Krawcheck, former CEO of Merrill Lynch Wealth Management and U.S. Trust

“No one has the type of access to this elite class of hedge fund managers as Maneet Ahuja does. The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds provides the type of in-depth insight and advice that only comes from countless conversations and time spent one-on-one with these managers. The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds is bound to be a classic.” – Leon G. Cooperman, Chairman and CEO, Omega Advisors, Inc.

The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds has captured the background, the ideas, and the money-making cutting-edge strategy of today’s drivers of financial thought, analysis, and action. It is a great read for those who track the capital market and the tug-of-war between creativity, ideas, and capital market stress.” – Mario J. Gabelli, Chief Investment Officer, GAMCO Investors, Inc.

“The great cultural divide in journalism has always been between access and accountability reporting. But, in the end, it’s really just a division of labor; readers need both. Ahuja works the access side of the street, and gets people to talk as few others can. The result is a surprisingly absorbing book about people who you can’t help but be curious about.” – Dean Starkman, Pulitzer Prize–winning journalist and Editor of the Columbia Journalism Review ’s “The Audit”

“Maneet presents clear and thoughtful studies of some of the most successful investors of recent years. The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds is highly recommended as an excellent guide to what has worked best recently in the rapidly changing and sometimes secretive world of hedge funds.” – Jim McCaughan, Chief Executive, Principal Global Investors

“With great insight and clarity, Maneet Ahuja distills the essence of what makes hedge fund managers successful.  The leading – and legendary – figures in the business provide her with their recipes for the “secret sauce” that puts them ahead of the rest.  This book is a must read for anyone considering investing in, working in, or just plain interested in the hedge fund industry.” – Randall S. Kroszner, Norman R. Bobins Professor of Economics, Booth School of Business, University of Chicago and former Governor of the Federal Reserve

Alpha Masters

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