“Greed is good,” trader and arbitrageur Ivan Boesky told our MBA class of 1984. He arrived with a stretch limo and an entourage, wearing a fur coat and an expensive Italian suit. He explained that his job was to find opportunities that others missed and that the trade-off in risk and reward was real. Those willing to accept more risk–the risk of losing money because a ship sinks or a drug fails–should get the bigger payout when the exotic cargo comes into port or the cure for disease proves successful.
The risk part is the problem. How can you minimize the risk and still receive high enough payouts to cover costs? Entourages aren’t cheap. One answer is a hedge fund.
