Absolute Returns: The Risk and Opportunities of Hedge Fund Investing

Absolute Returns: The Risk and Opportunities of Hedge Fund Investing is a rigorous, research-driven examination of hedge funds as an asset class, written for investors who want to understand how hedge funds generate returns rather than simply chasing performance figures. Alexander M. Ineichen approaches hedge fund investing from an analytical and institutional perspective, focusing on return drivers, risk structures, and the economic rationale behind alternative investment strategies.

Rather than promoting hedge funds as a monolithic solution, the book dissects their diversity. Ineichen explains the fundamental differences between traditional long-only investing and absolute-return strategies, emphasizing why hedge funds seek to decouple performance from broad market direction. Key concepts such as alpha generation, leverage, short selling, and dynamic risk exposure are explored with clarity, allowing readers to evaluate hedge funds on structural merit rather than marketing narratives.

A significant portion of the book is dedicated to risk. Ineichen challenges conventional volatility-based risk measures and introduces more appropriate frameworks for assessing downside risk, drawdowns, skewness, and tail exposure. He explains why many standard portfolio metrics fail when applied to hedge funds and how investors should adjust their evaluation tools accordingly. This makes the book especially valuable for readers interested in portfolio construction and capital allocation.

Throughout the book, hedge funds are positioned within a broader investment ecosystem. Topics such as diversification benefits, correlation behavior during stress periods, and the role of hedge funds in institutional portfolios are addressed in depth. The result is a balanced, intellectually honest treatment that neither glorifies nor dismisses hedge funds, but instead equips the reader with the analytical tools needed to judge them independently.

✅ What You’ll Learn:

• How hedge funds differ structurally from traditional long-only investments
• The economic sources of absolute returns and alpha generation
• Why volatility alone is an inadequate measure of hedge fund risk
• How leverage, short selling, and dynamic exposure affect performance
• How hedge funds can (and cannot) contribute to portfolio diversification

💡 Key Benefits:

• Provides a clear analytical framework for evaluating hedge funds objectively
• Bridges academic finance concepts with real-world investment practice
• Helps investors understand risk beyond standard deviation and beta
• Supports informed capital allocation decisions in alternative investments

👤 Who This Book Is For:

• Investors seeking a deep understanding of hedge fund strategies and risks
• Portfolio managers and analysts working with alternative investments
• Advanced private investors evaluating hedge funds critically
• Not suitable for beginners looking for step-by-step trading or investment instructions

📚 Table of Contents:

• Introduction to Absolute Return Investing
• Hedge Funds as an Asset Class
• Sources of Hedge Fund Returns
• Understanding Hedge Fund Risk
• Volatility, Drawdowns, and Tail Risk
• Leverage, Short Selling, and Strategy Design
• Diversification and Portfolio Construction
• Performance Measurement and Misconceptions
• Hedge Funds in Institutional Portfolios
• Conclusions and Investment Implications

Absolute Returns: The Risk and Opportunities of Hedge Fund Investing By Alexander M. Ineichen