Psychiatrist Ari Kiev is a prolific author who has written five books focusing on different aspects of the psychology of trading. However, this book is quite a departure from his prior works as it is aimed at individuals who aspire to become hedge fund managers or who want to improve as existing managers. Currently, there are more than 8,000 hedge funds in the United States with nearly $2 trillion of assets under management. Interestingly, in the first six months of 2008, 35% of the largest hedge funds had lost assets and sported an average performance of – 0.75%. Surely, from July through September their performance is much worse, especially during the financial institution turmoil involving Freddie and Fannie, Lehman Brothers, Bear Stearns and AIG among others.
Hedge fund managers need to focus their efforts on making sure that their staff works together as a team under stressful circumstances and to reap profits every month, irrespective of market conditions; during the market’s gyrations amidst the fall 2008 financial crisis, moves of 2% per day were common.
The author acquired his perspectives on hedge funds over many years of interaction and coaching of fund managers. Topics covered in this book’s individual in-depth chapters, coupled with case studies and interviews, include the value of leadership vision, assembling and refining your team, building and sustaining momentum, transcending self-imposed limits and empowering others. Kiev’s counseling experience in working with hedge fund leaders and traders is clearly demonstrated by the perspectives unveiled in each chapter. Hedge fund leaders are finding that managing their people is more important than managing their fund’s portfolios.
Subjects covered include managing communications channels, trading psychology, conflict resolution, and personal empowerment. Building a thriving and profitable hedge fund is very challenging and quite different from other business in that the traders in the firm must be psychologically and emotionally ready to ride the market roller coaster every day. This unique situation requires a strong leader and individual trader counseling as the markets have a way of humbling those who think they have it conquered. According to Kiev, hedge fund managers must set achievable goals and win/loss ratios for their traders, as well as identify specific risk parameters, minimize drawdowns, and take advantage of volatility.
In conclusion, existing or new hedge fund managers should be able to significantly speed up their learning curve, and hopefully become better managers by implementing the tenets put forth in this information packed book. They also will become acutely aware of the key components necessary to build a profitable and sustaining business model. The author provides real-life and indispensable lessons throughout this book, and there is no one more qualified to provide this critical insight than someone who has spent hundreds of hours mentoring hedge fund managers and their traders to achieve their goals.
Leslie N. Masonson is author of “All About Market Timing” and “Day Trading on the Edge.” Reach him at firstname.lastname@example.org.