So you want to know if a private equity fund is actually good? Turns out, that’s way harder than it sounds. There is no stock ticker refreshing every second. No public quarterly earnings call. You are stuck with imperfect tools and incomplete data. Welcome to Section 3.3 through 3.5 of Demaria’s book.
In Part 1, we covered the earliest roots of hedge funds, from Japanese rice traders to Karl Karsten’s statistical forecasting and Benjamin Graham’s value-oriented approach. Now we get to the person who took all those ideas and built something that actually changed Wall Street forever.
The preface of “The Hedge Fund Book” starts with Richard Wilson explaining why he wrote this thing in the first place. And honestly, his reason is pretty relatable. He read most hedge fund books out there over seven years and couldn’t find one that gave you straight, unfiltered advice from actual hedge fund managers.
In Chapter 6, we get into the “code” of the market. Order-driven markets don’t rely on a dealer to set prices; they rely on a set of rules. If you’re a developer building an exchange, these are your requirements.
So you have a bunch of big investors who want to put money into private equity but don’t want to pick companies themselves. What do they do? They hand their money to a fund manager and say “go make us rich.” Sounds simple. But the details of how that relationship works, how the fund manager gets paid, and what stops them from just enriching themselves at your expense? That is where it gets interesting.
Chapter 1 of Travers’s book opens with a quote from Mark Twain: “History doesn’t repeat itself, but it does rhyme.” And then Travers immediately proves it by describing a 1970 article from Fortune magazine that sounds like it was written yesterday. Hedge funds losing money, managers getting overconfident, regulators circling. That article is from 1970. Let that sink in.
In Chapter 5, Larry Harris explains that the market structure—the rules and the tech—is just as important as the orders themselves. It determines who has the power and who gets the profit.
I just finished reading “The Hedge Fund Book: A Training Manual for Professionals and Capital-Raising Executives” by Richard C. Wilson. And I wanted to share what I learned from it in a way that actually makes sense to normal people.
Here’s something most people don’t realize. If you have a pension, pay insurance premiums, or even have a retirement savings account, there’s a good chance some of your money is sitting in private equity right now. You didn’t choose it. Nobody asked you. But that’s how the system works.
There are somewhere between 8,000 and 10,000 hedge funds out there. Let that sink in for a second. Even if you had infinite money, how would you figure out which ones are actually good?