Hedge Funds

The last two decades has seen a dramatic increase in investor interest in alternative investments and chief amongst these have been hedge funds. The purpose of this module is to provide an in-depth study of the the hedge fund industry structure of the hedge fund industry and the strategies that funds use to generate returns. We will begin with issues of industrial structure, ultimately investigating why the hedge fund industry has come to look the way it does. Then the coverage will proceed through an exhaustive study of the 10 major hedge fund strategies paying particular attention to the risks underlying these strategies. You will be introduced to the key issues involved in constructing portfolios of hedge funds as well as issues that one faces when incorporating hedge funds into a traditional portfolio. For all topics you will be provided with both the academic and practitioner perspectives.

The Hedge Funds and the Asset Management Industry course is taught by Dr Nick Motson, who does research on portfolio management issues and, specifically, on hedge fund performance. Dr Motson spent many years working as a trader in the City of London and still actively consults on trading and asset management issues.

Course Content

  • An overview of the hedge fund industry, history, organisation, issues and current trends
  • A Review of the 10 major hedge fund strategies
  • Analysis of hedge fund performance, performance metrics and factor models
  • Hedge fund data, availability, biases and statistical properties
  • Case studies of five major hedge fund failures

On successful completion of this module, you will be expected to be able to:

Knowledge & Understanding

  • Demonstrate an understanding of the global market for hedge funds
  • Explain the structure of hedge funds
  • Describe and compare the investment strategies of hedge funds
  • Demonstrate an understanding of hedge fund diversification and what to expect when investing in portfolios of hedge funds or funds of funds
  • Assess the shortcomings of standard performance measurement tools such as the
  • Sharpe ratio and Mean-Variance analysis when applied to hedge funds


  • Appraise the global market for hedge funds
  • Assess the risk of hedge fund investments
  • Compare the drivers of return of the 10 major hedge fund strategies
  • Assess the pros and cons of investing in funds of hedge funds
  • Articulate the shortcomings of standard performance measurement tools such as the Sharpe ratio and Mean-Variance analysis when applied to hedge funds

Values & Attitudes

  • Show awareness of the ever changing landscape of the financial services industry and of emerging trend
  • Explain how pursuing the wrong strategy can lead to failure

Module Leader: Dr Nick Motson

Dr Nick Motson joined the faculty of finance at Cass in 2008 following a 13 year career as a proprietary trader of interest rate derivatives in the City of London for various banks including First National Bank of Chicago, Industrial Bank of Japan and Wachovia Bank.

Nick's research interests include asset management, particularly hedge funds, alternative assets and structured products. In 2009 he was awarded the Sciens Capital Award for Best Academic Article, in The Journal of Alternative Investments for his paper Locking in the Profits or Putting It All on Black? An Empirical Investigation into the Risk-Taking Behaviour of Hedge Fund Managers.

Nick teaches extensively at masters level on alternative investments, derivatives and structured products and in recognition of the quality of his teaching he was nominated for the Economist Intelligence Unit Business Professor of the Year Award in 2012.

As well as teaching and researching at Cass, Nick actively consults for numerous banks and hedge funds and has provided research or training clients including ABN Amro, Aon Hewitt, Barclays Wealth, BNP Paribas, FM Capital Partners, NewEdge, Societe Generale and Rosbank.

Dr Nick Motson's Online Profile

See Nick Motson discussing Libor rates on a recent episode of Cass Talks


The course is open to current undergraduates and recent graduates. Applicants must have studied finance as part of their undergraduate degree, with some coverage of financial markets and portfolio theory, or have a professional background in finance. It is recommended that students wishing to enroll on this course have mathematical skills to the equivalent of a UK A-level in Mathematics.

Students who have not studied a degree programme taught in English before are required to have an overall IELTS score of at least 6.5 (with a minimum of 6.5 in writing).