The book is designed for those who have a basic knowledge of financial instruments, markets, asset allocation, and portfolio management. A rudimentary knowledge of statistics and some of the basic principles of calculus is also helpful, although not a requirement. The book is organized into three parts related to basic concepts and market characteristics, an explanation of the individual strategies and financing tools used by hedge fund managers, and an overview of the process needed for the evaluation and analysis of individual managers and funds, including approaches to performing a due diligence process on any one fund. Each chapter has its own individual objectives and illustrations that can be read on their own or as part of the complete text. Part One of the book provides readers with an overview of alternative investments. It highlights the similarities and differences among various types of alternatives, including hedge funds. It establishes the framework for understanding fund‐level profit or loss calculations, performance measurement, and risk. It also provides readers with an understanding of the rationale for investing in hedge funds as well as the flows experienced by the sector over time. Part Two is designed to explore several of the most prominent hedge fund investing strategies in more detail. It provides straightforward explanations of the important terms, definitions, trades, organization structures, portfolio constructions, performance measurements, and risk assessments used in each strategy. Strategies are organized into those that are not directly correlated to the traditional stock and bond market, those that are equity or fixed‐income oriented, and those that are multistrategy in nature. It also includes new sections on the financing market and the secondary market for trading in hedge fund investments. Part Three explores the nature of absolute, relative, and risk‐adjusted performance measures; the impact of fund characteristics related to compensation arrangements; fund terms; and environmental conditions that motivate behavior and influence performance. This section also covers the due diligence process for selecting a single hedge fund for investment from a universe of peers. Topics covered include how to quickly assess and evaluate the people, pedigree, and processes that establish the DNA of any fund; understanding the investment and risk management process of a fund; the impact of the fund’s business model and counterparty risk on the fund’s performance and sustainability; and the role of a fund’s service providers in creating opportunities for a fund, influencing a fund’s performance, or protecting investors from fraud, blowups, or other calamities. The book ends with some final observations, a review of the challenges faced by the industry today, and the outlook or trends that are likely to continue going forward. This book can be used by commercial practitioners on a stand‐alone basis or by educators in conjunction with supplemental material available online that includes PowerPoint slides, Excel spreadsheets, end‐of‐chapter discussion questions, and a test bank of over 100 questions. Educators can download the test bank and other learning tools at Wiley’s Instructor Site.