Turan G. Bali, Yigit Atilgan, and K. Ozgur Demirtas: Investing in hedge funds: a guide to measuring risk and return characteristics: Elsevier Inc., 2013, 177 pp, approx. EUR 35, ISBN 978-0-12-404731-0

http://crossmark.crossref.org/dialog/?doi=10.1007/s11408-016-0284-6&domain=pdf

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Web End = Financ Mark Portf Manag (2017) 31:113115

DOI 10.1007/s11408-016-0284-6

BOOK REVIEW

Turan G. Bali, Yigit Atilgan, and K. Ozgur Demirtas: Investing in hedge funds: a guide to measuring risk and return characteristics

Elsevier Inc., 2013, 177 pp, approx. EUR 35, ISBN 978-0-12-404731-0

Florian Weigert1

Published online: 9 January 2017 Swiss Society for Financial Market Research 2017

Over the past 20years hedge funds have become an attractive investment vehicle for institutional investors and high-net-worth individuals for three main reasons: (1) they provide a historically attractive riskreturn trade-off (i.e., they deliver high average returns for relatively low volatility), (2) they exhibit low correlation with traditional asset classes and hence provide portfolio diversication benets, and (3) they aim to achieve positive returns independent of the current state of the economy (i.e., they target absolute instead of relative returns). Not surprisingly, assets under management of hedge funds and funds of hedge funds increased from about USD 500 billion in 2000 to more than USD 3000 billion by the end of 2015. Nevertheless, public opinion on these investment vehicles is frequently negatively biased and there is still considerable confusion over and misconceptions about hedge funds: What are they doing? How do they operate? What trading strategies do they use? How should their performance be measured?

In their book Investing in Hedge Funds: A Guide to Measuring Risk and Return Characteristics, Turan G. Bali, Yigit Atilgan, and K. Ozgur Demirtas seek to resolve these misconceptions and provide an accessible overview of hedge fund investing for rst-time investors, practitioners, and students. The authors goals in writing this book are twofold. First, they want to provide the reader a brief review of the hedge fund world, recognizing the heterogeneity among funds but at the same time identifying some common features that funds share, such as investment exibility, low transparency, illiquidity, an expensive fee structure, and active management. Their second and more important...