The BILLIONS Guide to Hedge Funds & Alternative Investments

Define alternatives as assets not long, publicly listed equity or debt, including commodities, crypto, private equity, and venture capital, and explore how they offer different returns when traditional markets struggle.

Examine why alternatives offer diversification and attractive risk-adjusted returns, grounded in modern portfolio theory and metrics like Sharpe, Sortino, and information ratio that measure risk of loss.

Explore how diversification lowers portfolio volatility through modern portfolio theory, Markowitz’s efficient frontier, and practical visualization, while noting the limits of relying on past returns and models.

Explore the internal structure of Axe Capital, from front, middle, to back office roles, and learn how investors, regulators, and service providers shape hedge funds and alternative investments.

Explore hedge fund managers and strategies through the lens of Axe Capital and Bobby Axelrod, including long/short, merger arbitrage, macro, and event-driven approaches.

Explore alpha as the excess return not explained by the benchmark, driven by manager skill and information advantage, with data science and machine learning shaping modern hedge funds.

Discover how regulation governs hedge funds and alternative investments, driven by US and EU laws, compliance data needs, and the rise of fintech and quantitative risk analysis.

Explore the front, middle, and back offices at Axe Capital, noting missing sales and roles from pricing and settlements to the general partner and limited partners.

Explore hedge fund fee structures, from 2%/20% to high watermark and hurdle rates, and how lock-ups and investor pressure influence general partner and limited partner incentives.

Explore a philosophy-based taxonomy of hedge fund strategies, including directional, global macro, event-driven, relative value, merger arbitrage, volatility targeting, distressed assets, and notes on quant as a tactic.

Explore the history and use of volatility as a risk proxy, from modern portfolio theory to the VIX, futures, contango, and hedge strategies.

Examine how derivatives enable risk control in large share sales by using a zero-cost collar: buy puts at $40 to protect, sell calls at $45 to offset costs.

Examine hedging amid a Brazil crisis, using short Brazil bonds, CDS, and long-dated VIX calls, while noting VIX limits and alternatives like variant swap on the Bovespa or oil futures.

Assess risk management in hedge funds by examining value at risk, market and liquidity risks, and limits that prevent big losses, with lessons from Axe Capital and Archegos.

Learn how fragmented markets and liquidity risk complicate large trades, and how electronic and algorithmic trading, liquidity sourcing, and dark pools help institutions execute big orders.

Learn how the Sortino ratio demonstrates achieving a higher rate of return with less downside in hedge funds and alternative investments.