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The Invisible Hands: Hedge Funds Off the Record - Rethinking Real Money [Hardcover]

Jared Diamond , Nouriel Roubini , Steven Drobny
5.0 out of 5 stars  See all reviews (4 customer reviews)

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Book Description

16 April 2010
Timely investment advice from the investors who survived—and thrived—during the economic crisis In light of the colossal losses and ongoing difficulties caused by the financial crisis, it′s obvious that the time has come to rethink money management in the broadest of terms. Drastic changes are clearly in order, but no new model has yet been implemented. Steven Drobny explores a new model from a simple starting point—by consulting the traders and managers who actually made money during this profoundly difficult period. In The Invisible Hands , top global macro managers reveal their own (clearly successful) approaches to markets and risk, suggesting important tenets for money management in a future, precarious world. Providing money managers and investors with the proven expertise of the best and most successful players in money management and detailing many specific elements of their risk management processes, The Invisible Hands : Outlines investment strategies for the rocky road ahead Provides guidance on how real money managers can implement certain elements of macro hedge fund strategies, developing a new paradigm of portfolio construction anchored in superior risk management Reveals intimate aspects of the investment processes of some of today′s top hedge fund managers The book highlights the similarities among successful traders, showing that the investment process should be anchored in understanding the true risk–adjusted returns in your portfolio.

Product details

  • Hardcover: 384 pages
  • Publisher: John Wiley & Sons; 1 edition (16 April 2010)
  • Language: English
  • ISBN-10: 047060753X
  • ISBN-13: 978-0470607534
  • Product Dimensions: 3.6 x 17.1 x 23.5 cm
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (4 customer reviews)
  • Amazon Bestsellers Rank: 433,227 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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"ARE YOU MORE CONCERNED, to paraphrase Mark Twain, with the return of your money than the return on your money? If so, a new book, The Invisible Hands , might be of interest. Written by Steven Drobny, founder of hedge–fund consultant Drobny Global Advisors, the book, subtitled Hedge Funds Off the Record –– Rethinking Real Money , focuses on the mistakes made and lessons learned in the financial crisis of 2008. The author says pension funds, endowments, foundations and other institutional investors must adopt a forward–looking, risk–based approach to investing, especially if they have annual cash needs." ( Barron′s , May 31, 2010) "Wildly enjoyed reading this solely for the vast amount of information and advice divulged.... The insight divulged in part two of is priceless.... Many books that have come out of the financial crisis focus on learning from mistakes. On the other hand, Drobny′s book pinpoints managers who fared well in 2008 as they were either able to preserve capital or grow it. This allows readers to learn from those who found success during a time when many others failed.... We treasured The Invisible Hands: Hedge Funds Off the Record and highly recommend it to anyone looking to learn from top hedge fund managers. We found the book′s particular focus on global macro strategies especially intriguing given that the majority of the coverage on our site centers on long/short equity hedge funds. Those of you looking for a peephole into the fast paced world of global macro would find this book advantageous. And if you manage money, then Drobny′s new boook is simply a must read." ( )

From the Inside Flap

The crash of 2008 crushed "real money" investors (endowments, pensions, foundations, and family offices). World markets—from real estate and equities to commodities and credit—collapsed. Some of the world′s most venerable financial institutions disappeared, while many hedge fund, private equity, venture capital, and real asset managers suffered immense losses. Yet, the world has not ended, and now, all investors must adapt to the new reality. Analyzing money managers who fared well in 2008—either by posting strong performance or by preserving capital—is a logical starting point. Global macro hedge funds are those money managers. Risk management is a key differentiator during crises, and global macro hedge fund managers anchor their investment processes in risk, rather than targeting outsized returns. In The Invisible Hands , Steven Drobny—cofounder of Drobny Global Advisors and author of Inside the House of Money —again reaches out to his professional network of leading global macro hedge fund managers to better understand how their risk management, investment, and portfolio construction process enabled them to effectively navigate the crash of ′08. With this book as your guide, you′ll glean valuable insights from unparalleled access to these winners in order to adapt to the new financial reality we all now face. The Invisible Hands begins by addressing the importance of "real money" management, examining its evolution and raising important questions about how portfolios are constructed. In Part Two, the experts or "Invisible Hands"—ten anonymous global macro hedge fund managers—discuss how they approach money management, revealing how they made money or avoided large losses during the crisis of 2008, and detailing how they would address some of the challenges faced by real money managers. Part Three introduces the invisible hand known as "The Pensioner," who provides an inside look at the real money world. Along the way, The Invisible Hands also: Examines some of the fundamental questions currently being asked by all investors as they struggle to understand the new paradigm of the post–crisis world Questions some core tenets of asset allocation and portfolio construction as these concepts are applied by real money investors Reveals how some of the best in the hedge fund business are positioning themselves for the uncertain road ahead And much more Page by page, The Invisible Hands provides investors and traders with the latest thinking from some of the best players in money management, highlighting the specific risk and return objectives of each, and discussing the evolution of certain styles and beliefs in money management. This book will allow you to discover how successful global macro hedge fund managers navigated the most significant financial crisis of our lifetime and learn how to incorporate certain elements of their approach into your own investment endeavors.

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Customer Reviews

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Most Helpful Customer Reviews
12 of 14 people found the following review helpful
5.0 out of 5 stars Worth every penny, if not 2 and 20! 31 May 2010
Unlike Drobny's first book, Inside the House of Money, Invisible Hands gives a vital new purpose to his interviews with top hedge fund managers. Steve asks each top manager how he/she would approach managing real money and in so doing has opened a critical debate about how our pensions and endowments are managed. This debate is much more important than most people realize and Steve brings the crisis in pension funds and endowments into crisp relief in the opening chapter. He does so by highlighting the real impact of investment losses on the funding obligations of these institutions and the implications for their members (or tax-paying society at large) when these funding promises cannot be met. Trustees, consultants and real money managers should take careful note of several themes running through these interviews: 1) do way with benchmarks which herd investors together and creat systemic risks, and 2) focus on avoiding large losses rather than merely minimizing return volatility and tracking error. Losing less than your competitors and contemporaries won't help you meet your funding requirements and shouldn't be considered success.

As someone who knows many of the interviewees in this book I would add that Steve has an access advantage by virtue of his business interests, so the insights he has gathered are second to none. If I had a criticism it is only that Steve hasn't summarized the insights and advice in the final chapter, which would make for powerful reading. But as I have done readers can highlight the most poignant parts themselves and compile their own summary, and that's half the fun.
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4 of 5 people found the following review helpful
5.0 out of 5 stars essential insight into risk management 22 July 2010
By M Ohr
An essential insider's guide to the best and brightest in the world of fund management. I think that what's most interesting to non professional and professional investors alike is the way these managers manage risk. They are managing money to maximize risk v. reward, not maximize returns. Only the best of the best have figured out that what is essential to consistently compound returns is to limit downside and cut losses. This often heard saying to cut losses and let winners run is so easy to say and yet so very hard to do in practice. Let Drobny's book serve as an essential text to see how the best and brightest manage this task.
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6 of 8 people found the following review helpful
By S.Dewan
An outstanding and deeply insightful work that I have no doubt will rank with Reminiscences, Market Wizards and Livermore's "How to Trade in Stocks", as a must read for an investor's library. The interviews are not only insightful and provide much advice, but unlike other works that purely ruminate on historical data to predict the future, the managers here talk frankly about multiple possibilities that the "interplay between the international economy and geopolitics " will provide. While we have seen many works about the origins and victims of the crash of 2008, here is a great discussion about the lessons learnt from those who survived. Even the amateur trader will learn much about protecting and positioning himself in these interesting times from those that emerged as winners.

Despite all this knowledge, its not a hard read at all. Indeed, if it wasn't for my underlining parts of every other page, I would have finished in a few days.

At some level we all manage money- even if just our own; If you are interested in the economy of the future and how to navigate it from those that have succeeded, read this book.
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7 of 11 people found the following review helpful
Having a one-on-one conversation with the best of the best is almost always the ideal way of learning about any human discipline. Drobny's series of in depth, detailed, engaging conversations with some of the world's most successful hedge fund managers comes as a pretty good 2nd best option.

For HFs in general, and global macro in particular, very few authors actually manage to offer any kind of real insight into the industry. Both of Steve's books (Inside the House of Money and Invisible Hands) are therefore in a league of their own, and are a must-read for any aspiring macro traders or money managers.

For me, the perfect book about macro trading is - a) based on knowledge and expertise of the very best b) clear, concise and to the point c) focused on concepts, rather than one-off examples d) looking at things from multiple dimensions. As far as those criteria go, Invisible Hands (and Inside the House of Money, for that matter), come pretty close.

One cannot help but think that the only thing we need now is a sovereign debt crisis, so that Steve has a reason to come back in 2-3 years with book number 3..
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Most Helpful Customer Reviews on (beta) 4.6 out of 5 stars  34 reviews
45 of 50 people found the following review helpful
5.0 out of 5 stars Real Insights for serious money managers 26 Mar 2010
By Andrew MacKay - Published on
Format:Kindle Edition
I read both Michael Lewis' "The Big Short" and Steve Drobny's "The Invisible Hands" this week and found them both fascinating. As per usual, Lewis is a wonderful story teller which makes "The Big Short" a fun read, though the book sensationalizes a few guys who made great one-off trades. Drobny's book, on the other hand, focuses on traders who are not one-trick ponies, but the stalwarts of sound investment. These are the less known, but equally successful traders that are often guarded about their methods and secretive about their dealings. The candid insight in "The Invisible Hands" is both impressive and enlightening and full of good ideas for the most effective ways to manage money in the future. It is a must read for anyone who manages money professionally.
28 of 31 people found the following review helpful
5.0 out of 5 stars Skin in the game 11 April 2010
By Anonymous - Published on
Format:Hardcover|Verified Purchase
While there are plenty of books cataloging the events of 2008, few have the direct insights of the participants who were actually putting their own money on the line. It's rare to get access to the thinking and process of such successful managers as they often have little incentive to disclose such information. As a result, we are buried by the media with market pundits sensationalizing investing and who have very little skin in the game. Here you get to sit in the passenger seat with a turn by turn account of why they did what they did in 2008 and how they anticipated what many failed to see. While each manager is different in style and perspective you discover that they all share a common ability to think independently and find trades with highly asymmetric payouts. If you want to learn how to really "think" like a successful macro manager read this book, if you want to simply be entertained then sit back, follow the herd and watch CNBC.
14 of 15 people found the following review helpful
2.0 out of 5 stars Not as good as the author's first book 25 Nov 2010
By Jackal - Published on
The book follows the format of the earlier book [[ASIN:047037909X Inside the House of Money, Revised and Updated: Top Hedge Fund Traders on Profiting in the Global Markets]. I really liked that book, so I had great hopes for this book.

The book is not for beginners. In fact it is not so easy to know what the target market is for this book. You need some hands-on familiarity with shorter-term trading (like a couple of months). The book is not about trading with a couple of weeks horizon or less.

The book consists of interviews with people that are heavily involved in trading different markets using what is called a macro-global strategy. The people interviewed control hundreds of millions of dollars. The questions are okay but not as good as the in the author's previous book. A lot of the questions are hypothetical, like what would you do if you were in charge of a university endowment fund. This calls for speculation and that isn't very interesting.

The interviews are longer than in the old book. The people interviewed do not feature with their name. Just an alias. Expect 50% of the interviews to be dull or useless, e.g. The House and The Bond Trader. Some interviews are nice like The Philosopher. Still they only provide snippets of information, but that is okay with me. However, I don't like that the author probably included all interviews he conducted. Some people like The Bond Trader just say nothing; if I were the author I would feel insulted. Now I only feel irritated after having read some of the interviews. Waste of time.

There are good interviews in the book and they deserve four stars. Right now there are too many one star interviews in the book. I understand why those people do not want to have their name mentioned in the book.

The author's first book gave an insight into hedge fund thinking. We don't need a second book that does the same. Too little discussion about the thought process of trading. My advice is to buy that author's first book. It is better. The currently reviewed book doesn't get more than two stars.
27 of 32 people found the following review helpful
3.0 out of 5 stars Hedgies & Real Money Managers 'fess u 23 May 2010
By Arbinvestor - Published on
Drobney has compiled a decent enough book which will be of short term interest to those who track the markets. However, the format is not original and was far better done in Market Wizards and New Market Wizards by Schwager. These books are also likely to stand the test of time far better than Invisible Hands.

The anonymity in the book of most of the interviewees proves annoying as you can only really place their insights in context if you know who they are. Having said all of this it does provide an interesting look inside the macro global funds that have been pushing and pulling markets in recent months / years. Clearly Drobney has a view on what he was being told by the interviewees but there is limited analysis of their responses. The result is lightweight in parts and comprises little more than an extended set of interviews with faceless money managers who did not drink quite as much Kool Aid as many others.
6 of 7 people found the following review helpful
5.0 out of 5 stars Get inside the minds of some of the best Money Managers in the world 8 May 2010
By Peter - Published on
I was excited to find out that Steve Drobny came out with a follow up to "Inside the House of Money" (his first book) with "The Invisible Hands", a book that gets inside the minds of some of the best Global Macro Hedge Fund Traders in the world...the ones that actually survived and thrived through the crash of '08.

Steve Drobny follows up "Inside the House of Money" with another excellent set of interviews with anonymous Macro Traders based in a number of different countries. These two books are almost like an extension to Jack Schwager's "Market Wizards" which came out in the early 90's. "Inside the House of Money" and "The Invisible Hands" cover the next generation of absolute return money managers. What makes these two books so good is that Steve Drobny has a huge network in the hedge fund space and also has a hedge fund background so he knows how to ask the right questions.

With the myriad of investment themes in the world today and the global economy in a fragile state of affairs, this book is a must read in an effort to make sense of it all. Each interview gives you much to think about, from mananaging risk to the impact of China to the inflation/deflation debate. Whether you aspire to manage money professionally or are looking to invest your money or just want to see where the global economy might heading, you must read this book and learn from the ones that can make money in any type of economic environment. You can't find this treasure trove of insight anywhere else.
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