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The 7 Habits of Highly Suspicious Funds

CHICAGO - MAY 21:  A trader in the S&P 500 sto...

Image by Getty Images via Daylife

Rick Bookstaber has very interesting checklist for determining the riskiness of a hedge fund.

You've heard this story before: A trader at a bank is knocking the cover off the ball. His success garners political power within the bank. 

He creates a fiefdom that insulates him from the rest of the firm; his trading group explodes in size. He lives a conspicuous, extravagant lifestyle.

His ego alienates the management and intimidates the support staff. Then the trader hits a rough patch. He uses all the tricks in the book to keep his poor results under raps while he tries to find a way to recoup.

Everyone is gunning for him, so he has to get back into the black, and fast.

Read the entire article on management of risk.
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