Book review: “Guide to Hedge Funds – What they are, what they do, their risks, their advantages” by Philip Coggan

A thorough yet easy-to-understand guide to the hedge fund industry. A great introduction for those who want to understand this part of the financial world.

By Stefan Nilsson

Philip Coggan’s “Guide to Hedge Funds” is part of an excellent series of guide books published by The Economist. The book was originally published in 2008 but it has aged well. All the hedge fund basics – what they are, what they do, their risks, their advantages – remain the same. Thus, this is a great overview for those new to or interested in the hedge fund industry. Philip Coggan has a background as an investment editor at the Financial Times and has developed an easy-to-understand way to explain the hedge fund industry to his readers. The book even has a very handy glossary of terms used in association with hedge funds. In the book’s opening paragraph, Coggan reveals that two of the computer servers at Man Group’s AHL hedge fund group in London have been named after the Hollywood actresses Meg Ryan and Jamie Lee Curtis. In the next paragraph, Coggan name checks author Tom Wolfe and his 1980s novel “The Bonfire of Vanities”. Such pop culture references at the very beginning bode well for an entertaining book. The book describes how sometimes obscene amounts of money are made and the rich rewards the top-performing managers can make. But Coggan also writes about the tough and less than glamorous work schedules that are a reality for many traders and others in the industry (“He gets up at 5am, checks the Bloomberg screens for the Asia closes and is in the office at 6am so he can talk to the firm’s Asia office in Singapore.”). As Coggan sums it up: “With a schedule like that, if you don’t enjoy your job, you will not last long.” Coggan understands the hedge fund industry well and explains the nature of what’s going on in the industry very well. Unlike some (many!) other journos, Coggan avoids making sweeping statements about hedge funds. He knows that all hedge funds are different, some very different and they often face each other on opposite sides in the markets. “For every hedge fund on one side of the trade, there is likely to be another that is betting in the opposite direction.” If you want to understand this industry, whether you are new or perhaps a veteran needing to refresh your understanding of some areas, this guide is a good, quick read that will do the trick.

Stefan Nilsson is the Founder and Editor of the Hedge Funds Club.