Philip J. Romero

Tucker Balch

What Hedge Funds Do provides a needed complement to journalistic accounts of the hedge fund industry, to deepen the understanding of non-specialist readers such as policymakers, journalists, and individual investors. What do hedge funds really do? These lightly-regulated funds continually innovate new investing and trading strategies to take advantage of temporary mispricing of assets (when their market price deviates from their intrinsic value). These techniques are shrouded in mystery, which permits hedge fund managers to charge exceptionally high fees. While the details of each funds' approach are carefully guarded trade secrets, this book draws the curtain back on the core building blocks of many hedge fund strategies Beyond the book's instructional goals, What Hedge Funds Do provides a needed complement to journalistic accounts of the hedge fund industry, to deepen the understanding of non-specialist readers such as policymakers, journalists, and individual investors. It is written by a fund practitioner and computer scientist (Balch), in collaboration with a public policy economist and finance academic (Romero).

An Introduction to Portfolio Management

What Hedge Funds Really Do

Rand Corporation

In November 1983 Dr. Carl Sagan and his colleagues reported to press on the results of their study of the atmospheric consequences of nuclear war. The TTAPS study found that for a wide range of possible U.S.-Soviet nuclear exchanges, including relatively small ones, the fires from nuclear detonations would inject into the stratosphere quantities of dust and soot that would obscure sunlight for months. Under the cloud, which would spread over most of the Northern Hemisphere, temperatures might drop scores of degrees, well below the freezing point of water; thus, 'nuclear winter.' The TTAPS team's findings suggested that the consequences of a nuclear war might be even more gruesome than previously supposed, and the long-term climatic and biological results might be nearly as severe for a war of 100 megatons as for 5,000. From the point of view of informing policymakers and the public concerning the consequences of wars involving nuclear weapons, the politicization of the nuclear winter issue is unfortunate. We can hope that in the next few years the criticism and defense of the initial TTAPS work will give rise to significant additional analyses, to illuminate the question. Realistically, further study will probably include both confirmations and contradictions of the original findings, without necessarily 'resolving' the issue. Sadly, the surrounding political atmosphere may obstruct sober consideration of the policy implications of the possibility of nuclear winter.

Philip J. Romero

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