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    Alternative Investments and the Mismanagement of Risk

     
    The risky business of alternative financial vehicles.
    7/21/2003
    This book provides an overview of alternative investments including hedge funds and derivatives. The author, a financial advisor for over thirty years, clearly considers them unsuitable for the average investor. He reviews the different products available and various high risks connected to each, such as lack of transparency and regulatory oversight, as well as their often illiquid and highly leveraged form. He also covers how these products are sold in the marketplace. For example, he makes the disturbing suggestion that those selling bundled funds often don't understand the complicated investments they contain. Yet the institutional investment community is still keenly interested now that "mutual funds fatigue" has set in. Therefore, he provides a stress testing method for assessing these investments' strategic risks. Given alternative investments' much-touted extra rewards, this procedure imparts a way for the prudent investor to also examine their extra risks.
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