I. Overview of the Hedge Fund Industry
A. History of hedge funds
B. Pioneering hedge funds of Benjamin Graham and
A.W. Jones
1. Analysis of the original A.W. Jones Long/Short Model
C. Size of hedge fund industry
1. Number of funds
2. Hedge Fund assets under management
II. What is Alpha?
A. Different methods of computing alpha
B. How to obtain estimates of the aggregate value for a
particular market
III. Hedge Fund Research vs. Traditional Investment Research
A. Short-term focus
B. Short selling strategies
C. Using screening tools to create an investment "short list"
D. Emphasis on simultaneous positions in multiple instruments
E. Importance of the carry trade
F. Conducting channel checks
G. Earning alpha through the SEC Freedom of Information
Act
H. Optimal use of bulge bracket and independent research
I. Hedge fund disclosure and secrecy practices
1. Interference desks
2. Employment lockup agreements
J. Tracking moves of successful hedge fund managers
IV. Analysis and Alpha Potential of Core Hedge Fund
Strategies
A. Long / Short
B. Long only
C. Short only
D. Market Neutral
E. Sector Focused
F. Statistical Arbitrage
G. Global Macro
H. Convertible Arbitrage
I. Capital Structure Arbitrage
J. Merger Arbitrage
K. Distressed Securities
L. Credit
M. Activist Funds
N. Managed Futures / Commodities
O. Publicly traded hedge fund-like structures
P. Carry trades
Q. Call options on hedge funds strategies
V. Market Efficiency and Alpha Generating Anomalies
A. Three forms of market efficiency
1. Weak, strong, semi-strong
B. Rationale for market anomalies
C. Value Strategies
1. Low P/E Effect, Low Price / Book, Low Price / Sales,
High Dividend Yield, Neglected Stocks, Dogs of the
Dow, Net Current Assets
D. Accruals Anomaly
E. Analyst Ratings
F. Analyst Estimate Changes
G. Value Line Enigma
H. Technical Anomalies
1. Trading Range Break (Support and Resistance)
2. Price and Volume Interrelationship
3. Momentum in Industry Portfolios
4. Short-term Momentum
5. Long-term Mean Reversion
6. Alexander Filter Rules
I. Calendar Anomalies
1. January Effect / December Effect
2. Turn of the Month Effect
3. The Weekend (or Monday) Effect
4. Holiday Effects
J. Announcement Based Strategies
1. Earnings Surprise
2. Trading by Insiders
3. Changes to S&P (and other indexes)
4. Whisper Numbers
5. Stock Splits
6. Dividend Changes
K. Other Anomalies
1. The Small Firm or Size Effect
2. IPO Lockup expiration
3. Initial outperformance and subsequent under-
performance of IPOs
4. Closed-end fund discounts
5. High short interest
L. Discussion of current usefulness of documented market
anomalies
M. How to combine anomalies in an optimal manner
VI. Strategies of Great Hedge Fund Managers
A. George Soros
B. Edward Lampert
C. Seth Klarman
D. Paul Tudor Jones
E. Michael Steinhardt
F. Julian Robertson
G. James Chanos
H. Others
VII. Financial Modeling for Hedge Funds
A. How to obtain a price target
B. Margin Analysis
C. Scenario Analysis
D. Discovering leading indicators of future earnings shortfalls
1. Accrual Analysis
2. Inventory Analysis
E. Discounted cash flow (DCF) models
F. Relative valuation models
1. Price to Earnings, Price / Book, Price / Sales,
EV / EBITDA
VIII. From Birth to Death: The Lifecycle of a Hedge Fund
Investment Strategy
A. The half-life effectiveness of a hedge fund strategy
B. The pipeline approach to hedge fund management
C. Reasons a hedge fund strategy breaks down
IX. Evolving From a Single Strategy Hedge Fund to a
Multi-Strategy Hedge Fund
A. Typical growth path of hedge funds
B. Pros and cons of internal expansion vs. hiring outside
talent
1. Amaranth example
C. Pros and cons of internal expansion vs. outsourcing
of capital
1. Tiger cubs example
D. Pros and cons of correlated vs. uncorrelated strategies
X. Hedge Funds in Brazil
A. Overview of Brazilian financial markets
1. Market history
2. Market size
3. Market performance
4. Trading volume
5. Securities traded
6. Settlement procedures
B. Brazilian culture and its implications for financial markets
C. Behavioral finance applied to Brazil
D. Strategies most likely to deliver alpha in Brazil
E. Examples of hedge funds operating in Brazil
F. Future outlook for Brazilian financial markets
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XI. Hedge Funds in Russia
A. Overview of Russian financial markets
1. Market history
2. Market size
3. Market performance
4. Trading volume
5. Securities traded
6. Settlement procedures
B. Russian culture and its implications for financial markets
C. Behavioral finance applied to Russia
D. Strategies most likely to deliver alpha in Russia
E. Examples of hedge funds operating in Russia
F. Future outlook for Russian financial markets
XII. Hedge Funds in India
A. Overview of Indian financial markets
1. Market history
2. Market size
3. Market performance
4. Trading volume
5. Securities traded
6. Settlement procedures
B. Indian culture and its implications for financial markets
C. Behavioral finance applied to India
D. Strategies most likely to deliver alpha in India
E. Examples of hedge funds operating in India
F. Future outlook for Indian financial markets
XIII. Hedge Funds in China
A. Overview of Chinese financial markets
1. Shanghai, Shenzen, Hong Kong, Taiwan
2. Market history
3. Market size
4. Market performance
5. Trading volume
6. Securities traded
7. Settlement procedures
B. Chinese culture and its implications for financial markets
C. Behavioral finance applied to China
D. Strategies most likely to deliver alpha in China
E. Examples of hedge funds operating in China
F. Future outlook for Chinese financial markets
XIV. Best Execution of Hedge Fund Investment Strategies
A. Optimal order routing strategies
B. Chopping block transactions into smaller orders to
minimize market impact and preserve anonymity
C. Exchange execution vs. ECN execution
D. Market orders vs. limit orders
E. Pros and cons of internal vs. external trading
XV. Managing a Fund of Hedge Funds
A. History of fund of funds
B. Size of fund of funds market
C. Pros and cons of fund of funds
D. Fund of funds vs. multi-strategy fund
E. Optimal fund of funds portfolio size
F. Portfolio construction techniques
G. Black Litterman model applied to hedge funds
H. Intelligent rebalancing of the fund of funds portfolio
I. Negotiating capacity
J. Negotiating fees
K. Obtaining adequate transparency
L. Managing inflows and outflows smoothly
XVI. The Psychology of Hedge Fund Managers
A. Theory on the relationship between investment
performance and states of hedge fund manager happiness
B. The importance of positive monthly returns
C. Behavioral Finance applied to hedge funds
D. The call option nature of hedge fund competition
XVII. Hedge Fund Due Diligence
A. Sample due diligence list
B. How to assess operational stability
C. How to conduct reference checks
D. How to conduct background checks
E. How to maintain an ongoing due diligence process
XVIII. Risk Management for Hedge Funds
A. Using style analysis to detect style drift
B. Measuring liquidity risk
C. Measuring concentration
D. Effective measurement of fund leverage
E. Value at Risk (VAR) for hedge funds
F. Conducting hedge fund stress tests
G. Creating a risk dashboard for effective monitoring of
hedge funds
H. Discussion of "fat tails" and Black Swan Theory
XIX. Hedge Fund Performance Evaluation Techniques
A. Sharpe Ratio
B. Treynor Ratio
C. Jensen's Measure
D. Sortino Ratio
E. Upside to Downside Capture
F. Batting Average
G. Appraisal Ratio
H. Omega Ratio
I. Survival and other biases in hedge fund returns
XX. Discussion of Global Trends in Hedge Funds
A. Greater transparency
B. Lower fees
C. Hedge fund replication - to a limited extent
D. Increased liquidity
E. Increased transparency
F. Greater regulation
G. Emerging market focus
H. Focus on niche strategies
I. Focus on emerging managers
J. Discussion of "fat tails" and Black Swan Theory
XXI. Portable Alpha Strategies and Hedge Funds
A. What is portable alpha?
B. Growth in portable alpha market
C. Role of hedge funds in portable alpha
D. Hedge funds most likely to deliver portable alpha
strategies
XXII. Walk Through Internet Sites Relevant to Hedge Fund
Research and Management
A. SmartMoney MarketMap
B. SeekingAlpha.com
C. Google Alerts
D. Nasdaq Real-Time Filings website
E. Delphion.com
F. Many more
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