Number of New Hedge Funds Up

Number of New Hedge Fund Launches Increases

The number of new hedge funds is increasing finally and that’s great news for the third party marketing industry as more potential clients enter the industry.  With 2,100 hedge funds closed during the credit crisis, few expected a rise in new hedge fund launches this year.  But if new hedge funds continue to launch at this year’s pace, the industry may see the first year since 2005 of annual growth in new fund formations.  Hedge funds appear to be back with renewed investor confidence and new and experienced hedge fund managers ready to try it again.  Hedge fund launches have been consistently falling from 2073 in 2005 to 659 last year but this trend appears to be reversing.

It might also be that funds that had posted huge losses closed down so that the managers could start with fresh records, resetting high-water marks so that they can collect performance bonuses without making up the money lost in 2008.

When Hedge Fund Research unveiled its second-quarter data earlier this month, all eyes were focused on the slowing number of hedge fund liquidations. What was little noticed were the hedge fund launches. Since 2005, they have been falling steadily from a peak of 2073 in 2005 to 659 last year. The slide appeared to be continuing in the first quarter when 148 new hedge funds were launched. But, in the second quarter, 182 new hedge funds were launched, just as the equities markets bottomed.

The rising launches are a “constructive development,” says Ken Heinz president of Chicago-based Hedge Fund Research. “You are continuing to see risk tolerance and risk appetite improving from the historical lows at the end of 2008. ” To be sure, there are still more hedge funds shuttering their doors than opening them, with 292 going out of business in the second quarter alone, according to Hedge Fund Research. But there have been some notable launches.  Source

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Top 5 Hedge Fund Website Rankings

Based on the Alexa Traffic Ranking Tool here are the top 5 Hedge Fund Website Rankings:

1. HedgeFundBlogger.com, Alexa: 122,000
2. HedgeCo.net, Alexa: 140,000
3. Albourne Village: 240,000
4. HedgeWorld: 455,000
5. HedgeFund.net: 539,000

One way to judge popularity of a website is through it’s Alexa Traffic Ranking, the smaller the ranking the more traffic the website gets. Websites like Amazon.com and Google have rankings of #7 and #1 while typical blogs rank anywhere from #50,000 to #900,000.

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Hedge Fund Liquidations

Hedge Fund Launches Rise & Liquidations Drop

The hedge fund industry is flush with money compared to last year, leading to many new hedge fund startups. While it was very difficult to raise the capital for new funds during 2008, an estimated $2 billion has been raised for 8 new hedge funds. Hedge funds are also trying to accommodate investors with fewer multi-year lock-up periods, lower fees and cash redemptions.

The number of hedge fund liquidations is falling significantly by about 50%. Hedge fund researcher Kenneth Heinz says that the rise in new hedge funds and the drop in liquidations this year is consistent with investors’ increasing appetite for risk after a historic low in the industry. 200 of the 376 liquidations were fund-of-funds showing a consolidation in the industry. The following video explains these trends:

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Hedge Funds Back

Is the Hedge Fund Industry Coming Back?

Hedge funds are back but with a bit less weight to throw around. The publication BreakingViews finds that hedge funds are back on the up and up but a number of adverse factors–losses, redemptions and the credit crunch’s lowering of leverage–have combined to cut down the power hedge funds once held. However, this can be viewed as a good thing for the industry as “trades are less crowded and more profitable.”

The publication figures that global hedge funds AUM was about $2 trillion in June 2008 with funds typically borrowing $4 to every $1 of investor money, making the industry’s “firepower” near $10 trillion. Today, however, that “firepower” has fallen by over 70% to under $3 trillion, with leverage-to-investor cash ratio of $1-to-$1.

Fast forward nine months to what looks like the trough last March, and hedge funds managed some $1.3 trillion. Leverage seems to be down to perhaps $1 for every $1 of investor money, according to Wall Street prime brokers. So the total investment by hedge funds has plunged more than 70 percent, to less than $3 trillion.

Crowded trades were one problem hedge funds faced before the credit crisis, Breakingviews says. Funds that specialize in exploiting inefficiency in the market for convertible bonds, for example, had an uninspired 2007 and a particularly bad 2008. Market moves didn’t help, but overcrowding also led to a dearth of real arbitrage opportunities.

Sharply reduced hedge fund firepower helps explain why this problem has waned, according to Breakingviews. Convertible arbitrage funds are up 24 percent so far this year, according to Credit Suisse/Tremont, against returns of 7 percent for the typical hedge fund and 3 percent for Standard & Poor’s 500-stock index. Moves in debt and equity markets played a big part, but there have once again been mispricings to exploit and fewer dollars chasing them, Breakingviews says.

Read More…

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Hedge Funds Industry Changes

Changes for New Hedge Funds in 2009

The hedge fund industry has obviously gone through some changes after the financial crisis and that change seems to be in the form of smaller and more economical. There is also a lot less of hedge funds opening, with only about a tenth of the 2,000 hedge funds launched in 2005 expected this year.

Hedge funds are drawing investors because limited partners recognize the enormous potential through buying up distressed investments including: “debt, asset-backed securities, and investments taking advantage of the government’s Term Asset-Backed Securities Loan Facility (TALF).” Tom Kreitler of C.P. Eaton Partners explains for funds can capitalize on the market conditions, “Markets are extremely mispriced and inefficient in many areas. There has also been a large reduction in the number of funds; and proprietary trading at the old investment banks, which took out a lot of investment opportunities, has almost ended. Any strategy that uses some asset mix of equities, debt or currencies could succeed given the current dislocation.”

Although more hedge funds are being launched recently, it is still only a small percentage of the funds that were opened only a few years back. But that can be beneficial to the industry because it has been so overcrowded with new hedge funds. These new funds often failed because they were led by inexperienced and inefficient managers. Today, limited partners are more demanding of their managers and less willing to give away capital to untested GPs. This makes fundraising a more difficult job and even experienced managers raise smaller funds than they would have a few years ago.

Funds are also trying to cut costs on everything that does not have to be directly managed by the staff. Outsourcing operation duties to outside firms is expected to be more popular with new hedge funds. New hedge funds can also expect to face a more involved and scrutinizing investor after the scandals that have troubled the industry. Limited partners are less likely to invest with inexperienced managers. “We’re seeing established managers launch additional funds on top of those they already run. We’re also seeing well-known managers from established shops strike out on their own” says Harold Yoon of ING Investment Management’s fund of funds. Yoon also notes, “Managers are being asked about whether they’ve been sued before, their trading backgrounds, and what businesses they’ve run. It sounds mundane, but people who defrauded investors were accused of similar shady behavior in the past.” (Source)

Other challenges facing new hedge funds are the threat of new tougher regulation, limited partners pushing for lower fees, and demands from investors and regulators about the fund’s liquidity.

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Tags: changes in hedge fund industry, hedge fund industry changes, hedge fund industry, hedge funds changes in 2009, new hedge funds, hedge fund launches

The Hedge Fund Industry

The Hedge Fund Industry | Video Update

Here is a short interview with a quant hedge fund manager commenting on the state of the markets and hedge fund industry as a whole. This video discusses leverage and how many hedge funds can still access the leverage they need. In some cases leverage is cut off completely while others are operating just as they were in 2006 and 2007. If you are reading this over email through our daily hedge fund newsletter please click here to watch the video now.

Watch over 100 additional videos on hedge funds by clicking here.

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Here is a great PowerPoint on the hedge fund industry, prime brokerage services and how many parts of the industry come together as a whole.

To access this PowerPoint please click here now.

Tags: Prime Brokerage Industry, Prime Broker Industry, Prime Brokerage, Prime Brokers Industry, Hedge Fund Industry, Hedge Funds Industry, Prime Brokerage Industry Statistics

Hedge Fund Growth

Hedge Fund Industry Growth | Quotes

Here is a refreshingly optimistic article amidst the recent onslaught of hedge fund redemption notices and closures. I agree with almost everything said below:

In spite of suffering more than most markets in the global downturn, hedge funds are likely to bounce back faster than other markets. That is the view of Barclay’s Capital director Frank Gerhard whose company is a major player in the regional hedge fund market and is in the process of launching a Sharia-compliant hedge fund platform along with Sharia Capital.

“We have been running a roadshow around the region and there is still a lot of institutional and high net worth individual interest in the sector.

“What we are likely to see is hedge funds bouncing back in the first quarter of next year even if equity markets remain depressed.

“Each time there is a major market downturn, like the Asia crisis of 1998 or the slump after the dotcom bubble burst, we have seen alternative investments like hedge funds bounce back far quicker than other investments.

“Even if we are going to continue seeing a bear market next year hedge funds can still be successful by shorting in this environment.

“We have been talking to a lot on institutions in the region and we expect them to start making decisions to invest in the hedge fund sector early in the new year.

“We are quite positive because even though things have been very dark the night is always darkest just before the dawn. Source

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Hedge Fund Discussion

Hedge Fund Discussion Piece

I can’t tell if Mr. Berko is for or against hedge funds, I will leave it up to you to decide….

Dear Mr. Berko: There’s big trouble in the $3 trillion hedge fund industry. Many have lost massive amounts of money because the market has gone against them and thousands of hedge fund employees are losing their jobs. The Hedge Fund Sector is a very vital sector of our economy and I’ve not heard a word from the Department of Treasury or the Federal Reserve about helping the hedge fund industry in this economic crisis. In 2000, then Federal Reserve Board Chairman Alan Greenspan rescued Long Term Capital Management and saved it from complete collapse. Many hedge-fund investors can’t get their investments back because the hedge funds can’t get the credit they need to finance their portfolio positions or investor withdrawals. Do you believe the government should assist these people who invested their money in good faith? — H.W., Boston.

Dear H.W.: Hedge funds are being rocked, socked, knocked, clocked and docked by the market. Most deserve every blow they get and then some. These financial leeches provide zero-sum benefit to our economy. Many of these funds contributed to the mortgage crisis, the credit crisis, the oil crisis, the bank crisis and the soon-to-occur credit card crisis as well as the soon to-occur-crisis with the Big Three auto companies. These funds, along with Goldman Sachs, Lehman Bros., Bear Stearns, etc., helped push the price of oil past the $145 level by trading contracts between themselves at predetermined prices. They are one of the reasons many Americans had to pay $4.25 a gallon and more at the pump. These funds traded and shorted billions of dollars of subprime mortgage securities between themselves, creating unprecedented volatility and cascading losses. And these hedge funds shorted hundreds of millions of shares of bank stocks, collapsing their market values, pushing Countrywide, Fannie Mae, Freddie Mac and Washington Mutual into bankruptcy.

Marrow suckers These hedge funds gleefully sucked the marrow from the backbone of our financial system. They had this power because they are unregulated (they had strong lobbyists in Congress) and are not required to abide by the same rules that control the trading activities of Fidelity, T. Rowe Price, Vanguard and other funds owned by most of the less-affluent public. Many of the 10,107 hedge funds are hurting badly, very badly, as they got caught on the wrong side of the oil market, the wrong side of the commodity market, the wrong side of the dollar, the Yen and the Euro. They got sliced and diced in the derivative market, were boxed by the credit market and bet the wrong horses in the mortgage-backed securities markets. Things got so bad that investors began a stampede to safety and these funds, which were highly leveraged, didn’t have the capital to return principal to their hugely wealthy investors. Read more…

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Industry Rumors

Hedge Fund Industry Rumors

Here is a video a short video on Citadel and some recent hedge fund industry rumors.

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Cramer on Hedge Funds

Cramer on Hedge Fund Industry Performance

Never short of opinions here’s a piece on Cramers view of the markets and how hedge funds are affecting them now:

Forced selling by hedge funds is behind the late-day market volatility these days, Jim Cramer told the viewers of his “Mad Money” TV show Thursday.

He fears we may never see a bottom until the selling comes to an end.

Cramer said many hedge fund strategies have just been dead wrong, such as the betting on a Chinese recovery after the Olympics that failed to materialize. As evidence, he used the Baltic Dry Shipping Index and the Shanghai Composite Index to graphically show how much China’s economy has slowed.

The result of hedge funds gone bad is forced selling, he said. At around 2:45 p.m. each day, hedge funds begin preparing for the next day’s round of redemptions by liquidating their ill-conceived positions.

These billion-dollar liquidations, in turn, wreak havoc on the markets, causing huge late day declines and subsequent snap-back rallies. “These funds are getting killed,” he said.

Cramer also blamed on what’s known as “fund-to-fund managers,” middlemen between the large hedge funds and their clients. These managers, who typically take a 1% to 2% commission for their services, often pressure funds for immediate redemptions, forcing managers to think only for the short term.

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Hedge Fund Industry

Hedge Fund Industry Survival Notes

Here is a short article on the hedge fund industry business model and my comments in red.
______________________________________________________

I have thought for a while that the hedge fund business model was breaking down. In fact I turned down an offer to raise capital in a hedge fund format a few weeks ago. This summer it appears that the soft white underbelly of hedge funds is being exposed as the four legs of hedge funds are being kicked out right from under the industry:

• Leverage – hedge funds need leverage to generate excess alpha and non-correlated returns. Leverage is being removed from the system like never before for hedge funds. I’m not sure what the difference is between “excess alpha” and alpha but a fair number of hedge funds use no leverage. Both the prime brokers and use of leverage will survive these times.

• Manipulative Short Selling – short selling is a good thing. Manipulative short selling is illegal and against the interest of shareholders. That is now going to be enforced and put to an end. Next we will have the reinstatement of the up-tick rule. It worked for 70 years but failed us in the last year. Hedge funds provide liquidity and as someone else recently noted in the news – often the short sellers are the guys in white hats which come down on bad companies.

• Performance Fees – many funds are closing up because the managers won’t earn performance fees. This resulted in massive liquidations which are still continuing. There will always be liquidations and poor performance. Now that both are higher than usual it will hopefully rid the industry of the extra 30% of hedge fund managers who have a dream but not the right team and skills to produce long-term risk adjusted returns.

• Lack of Transparency – The SEC took the first step in requiring hedge funds to report short positions over certain limits. Mutual Funds have to file reports with the SEC and provide shareholders with a quarterly report which is part of the SEC filing. The wall of transparency will be brought down. I don’t believe it will, even if the US takes a radical stance on this issue many other countries are happy to go their own ways when it comes to regulating hedge funds. Many areas of the world are more than happy to cater to the business the United States creates for them through our strict tax and regulatory regime.

So what will happen? Eventually we will see assets flow back to more traditional forms of investment – managed accounts, mutual funds and self directed investments. I disagree – the pendulum my swing back and forth but alternative investments and hedge funds are here to stay. I believe eventually there will be less reports on the death of the industry as a whole.

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Germany Hedge Funds

Germany Hedge Fund Guide

Here is a short collection of articles on the hedge fund industry in Germany. I am always looking for more valuable online tools and resources to add to these geographical hedge fund guides to the hedge fund industry. If you have a white paper or PowerPoint that I can include here please send me an email and I will post it for everyone’s benefit.

• Germany to Step Up Hedge Fund Scrutiny. As a plan for German governemnt to place a greater scrutiny on country’s hedge fund investment, Barbara Hendricks, the deputy finance minister, said that Germany would force the funds to declare stakes in companies when they rise to three percent, comparing to the current threshold of 5% as in most European Union states.
• G8 HostGermany Fails to Convince on Hedge Fund Issue (8/06/2007). Germany had put hedge funds on top of the agenda of its year-long G8 presidency given its concerns that rapid growth in the increasingly powerful sector could destabilize the entire global financial system. But the world’s richest nations — Britain, Canada, France, Germany, Italy, Japan, the United States and Russia — have so far spectacularly failed to find a common line on the issue.
• Hedge Fund Opportunities in Germany: Practical Guidance Q&A. With the new German Investment Act and Investment Tax Act in force since January 1, 2004, new opportunities to access the German hedge fund market from abroad have opened up. The objective of this paper is to give practical, hands-on guidance to foreign hedge fund managers who are interested in targeting the growing German market.
• This advisory article briefly explains the taxation issues in Germany’s hedge fund industry for both fund managers and investors. The topics include the various tax structure, requirement and regulations.
• This special report (Aug. 2006) features several articles provide some recent development and oveview of German hedge industry and some decription of it legislatory structure and law regulations. :

German Market Growth Benefits from Master KAG Structure
An interview with Christian Benigni, one of the top three European hedge fund managers with approxiamtely USD 14 billion dollars under management, shared with readers his views on the propects and the potential future development of the German Hedge Fund industry.

Delivering Tax Transparency
When the new legislation governing alternative investment funds came into force in Germany in 2004. HSBC’s Alternative Fund Services (AFS) took a two-fold approach to capitalise on the development of the market. On one hand, in partnership with its software provider, Advent Geneva, and with advice from PricewaterhouseCoopers, AFS launched a project to deliver tax transparency to their clients to enable them to distribute their funds in Germany.

The Evolution of Prime Brokerage in Germany
Since the introduction of the 2004 German Investment Act, there has been debate on the potential growth of the local hedge fund market, and on possible ‘local’ prime brokerage solutions. However, as well as domestic hedge funds, the legislation deals also with another important area: the regulation and distribution of ‘foreign’ (non-German) hedge funds. Furthermore, the related Investment Tax Act enables local investors to obtain favorable tax treatment on investments in foreign funds, including hedge funds.

New ETFs Improve index Tracking and Reducing Trading Costs
Exchange-traded funds allow investors to track the performance of specific market segments more efficiently and reduce costs, helping institutions to create more efficient portfolios for use in core-satellite strategies. A new category of innovative ETFs recently introduced by Indexchange takes advantage of the European Union’s Ucits III directive to mirror the underlying index even more accurately while reducing trading costs.

Institutional Market Pised for Take-off
The change of the law in 2004 allowed hedge funds and funds of hedge funds to be launched under German regulations for the first time. Under the German rules, a Master KAG – service company for hedge funds – can take charge not only of the administration of a fund but its launch, registration and ongoing reporting, leaving the fund manager to focus on the investment management, marketing and the distribution.

Derivatives Take Larger Role with Hedge Funds
Surging flows of capital into hedge funds over the past few years have aroused fears that overcrowding in popular strategies will drive returns down and reduce the appeal of alternative investment approaches. However, the growth of sophisticated investment techniques involving the use of exchangetraded derivatives, with their high levels of liquidity and transparency, is offering managers and investors new opportunities to achieve higher returns, resulting in increased usage of futures and options worldwide.

Hedge Funds Liberalisation Starts to Bear Fruit
When Germany liberalised its rules governing hedge funds and taxation of their income at the beginning of 2004 the initiative was hailed in some quarters as a new dawn for the sector. If Germany, with its tradition of conservatism in investment choices and reputation for pernickety rule-making, could embrace hedge funds and funds of hedge funds, the argument went, the rest of Europe and other markets around the world would surely soon be following suit.

• Hedge Fund Opportunities in Germany. With a new German Investment Act and Investment Tax Act in force since January 1, 2004, new business opportunities have opened up in the German hedge fund sector for foreign providers as well as those onshore. The focus of this artice is on the distribution of foreign hedge funds in Germany and with more detailed information on the provisions of the recent passed Investment Modernization Act
• Introduction and Regulation of Hedge Funds in Germany. On January 1, 2004 the German Investment Act and the German Investment Tax Act were enacted as the major parts of the investment Modernization Act. The focus of this article is to analyze the effect of these new tax provision and also some of the regulatory concerns.
• Hedge Funds and Retail Business: Comparing German, Italian, Swedish and English Law. The aim of this work is to compare the German, Italian, Swedish and English law as to see the principal policies and regulatory cornerstones that will lead us to understand and comprehend the way in which Hedge Funds and their relationship with retail investors is developing.
• This advisory article briefly describes the regulatory structure of Germany’s hedge fund industry; topics include authorization requirement and process of setting up the fund, capital requirements, and marketing restrictions.
• German Hedge Fund Legislation: Modernized but still old-fashioned. This report analyzes the legal framework of the newly passed new German Investment Act and its impacts on the current system. This analysis is conducted from three aspects: past (comparison to old laws), present (its current state), and future (need an up-to-date regulation?).

Conferences & Seminars:

• Pension Fund Investment World Germany 2008. 9/20/2008 – 9/22/2008, Germany – Frankfurt.
• 4th Annual European Conference. A full day of plenary, breakouts and roundtables with leading speakers from venture philanthropy, private equity community, foundations and professional service firms. 9/23/2008, Germany – Frankfurt.

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HFWG Standards

Hedge Fund Working Group Standards

An influential group of hedge fund managers in the UK calling themselves the Hedge Fund Working Group have published a Consultation Paper that seeks to establish a set of best practice standards for hedge funds. If they are deemed appropriate for the UK, do we need such standards in Australia?

The UK group was Chaired by former Bank of England Monetary Policy Committee member, Sir Andrew Large and supported by 14 hedge fund managers mostly UK-based. Interested the work was commissioned outside the auspices of industry associations such as AIMA, MFA and the CFA Institute which would normally be associated with developments of this nature.

While the standards were set against the backdrop of the UK’s Financial Services Authority, the group anticipate the standards will have global relevance and are seeking feedback, including from the Australian hedge fund industry before final publication.

There is a clear defensive purpose to the establishment of the standards; to address what is perceived as unwarranted criticism of hedge funds, to acknowledge responsibilities of hedge fund managers and to prevent poorly thought regulation. However, at the heart of the standards is the importance of transparency particularly where funds and managers are dealing with illiquid and complex instruments. This is commendable.

The group also acknowedges the systemic risks that are often levelled against hedge funds associated with the concentration of holdings in particular strategies/positions and accepts the importance of on-going dialogue with regulators responsible for financial stability. The concerns of the Reserve Bank of Australia on this matter have been addressed in an earlier story on this blog titled “Reserve Bank of Australia’s Stevens Flags Australian Hedge Fund Risk”, September 2006.

The standards adopt a conform or explain approach and there is an expectation that conformity with the standards would be expected to be posted on a firm’s website. To ensure on-going relevance the group expect that ownership of the standards will vest in a Board of Trustees. The group acknowledges the likely role of AIMA in supporting the evolution of the standards by the Trustees.

If Australian hedge fund managers are to adopt the standards there will need to be an acknowledgement of some important differences between the environment in Australia and that of the UK.

The group describes hedge funds generally as “investor access is regulated, but the product itself is lightly regulated”. This is very different to the situation in Australia (and the UK), where investor access is not regulated, but the product itself is regulated in the same way as all other managed fund offerings to the retail investing public. Given the almost impossible task of separately defining a hedge fund (acknowledged to some degree by the group), and given the differences relate more to how instruments are used, not the instruments themselves, the approach of the Australian regulator, ASIC, is both sensible and sustainable.

The areas of concern covered by the group are; disclosure, valuation, risk, fund governance and activism. Within these, important sections relate to valuation of illiquid assets, handling of conflict of interest and investor activism. For the most part disclosure and risk is well acknowledged and dealt with in Australian product disclosure statements. The importance of segregating valuation from portfolio management functions has been highlighted including in recent AIMA publications.

Its not clear whether the standards provide any additional “protection” to investors in Australian managed funds. Neverthless, the spirit of the draft is fair and reasonable. Australian hedge fund managers are encouraged to read the detail of the draft standards and provide comments to the group, particularly where they make the standards more globally applicable. If there are matters that could be applied to improving existing industry association guidelines, such as those provided by the Australian chapter of AIMA, offer documents and hedge fund reporting then they should be considered for adoption.

by Rick Steele

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52 Hedge Fund Articles

Top 52 Most Popular Hedge Fund Articles

A few of my blog posts seem to be on fire compared to the rest. Just 10-15% of all of the articles that I have published get over 75% of the total pageviews on HedgeFundBlogger.com. This post as created to show you which articles my website analytics package says is getting all of the traffic.

I’m close to publishing my 500th article on hedge funds, this is great for compiling guides, e-books and helping provide resources on many subjects but a mess when it comes to deciding what to provide links to on the main page of my hedge fund blog. In addition to having my blog accessible via HedgeFundBlogger.com I am also doing my best to clean up my website and provide categories of articles, guides, free PDF e-books, etc.

Below is my list of the a top 52 hedge fund articles posted over the last year based on the number of pageviews of each post.

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• Hedge Fund Employment
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Most Popular Hedge Fund Due Diligence Articles

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• Hedge Fund Databases
• What is a Hedge Fund?
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- Richard

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Hedge Fund Markets

Hedge Fund Markets

Here is a panel session from the World Economic Forum discussing who is really in charge of the world economy and avoiding widespread systemic risk. Many of what is discussed effects hedge funds and the hedge fund markets in general: http://www.youtube.com/v/ly3W8SwNPKk&hl=en

- Richard

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Hedge Funds Failing or Thriving?

Thriving, yet the answer you will get varies widely based on who you ask.

One of the best performers of 2007 has been Paulson Capital who raised a $1B fund to bet early on the subprime meltdown. He made out with a handsome 587.5% return for 2007 as of 10.30.07. “There’s never been a trade of this size of profit in the history of financial markets,” says Arki Busson, chairman of EIM Group, which has $13bn invested in hedge funds.

While 2007 was a rough year for some equity managers while others excelled in showing their stock-picking opportunities despite the overall volatility. Even with all of the market-based turmoil hedge funds produced strong returns through 2007. Credit Suisse/Tremond hedge fund data shows that hedge funds are out pacing the S&P 500 and MSCI World Index by several hundred basis points. Many hedge funds are in hiring mode with growth outstripping the number of professionals they have on board to manage it.

This outperformance by hedge funds is contrary to what you might have guessed if you frequent the NY Times or WSJ on a regular basis, both have been focusing on hedge fund meltdowns, quantitative models failing to perform, and a few frauds within the industry. It might sell more newspapers but it is also misleading, it is always safer to check the true pulse of the industry by speaking to professionals working within it, looking at data produced directly from groups like the Hedge Fund Research Group and reading articles written on niche sites such as the Albourne Village, Financial Times, Fierce Finance, All About Alpha or HedgeFundBlogger.com.

Read more articles like this within the Hedge Fund Performance Category of this hedge fund
blog.

Additional Resources:

• Hedge Fund Marketing Guide
• Hedge Fund Terms & Definitions
• Hedge Fund Due Diligence
• Hedge Fund Employment Guide
• Hedge Fund Strategy Guide
• 52 Most Popular Hedge Fund Articles
• Investment Book Reviews
• Geographical Hedge Fund Guides
• Hedge Fund Performance Category
• Miscellaneous Hedge Fund Information

- Richard

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Story Source: FT
Picture Source: FT

Hedge Fund Industry

Here are a few trends, facts, notes about hedge funds that I have picked up and some people might not know. Eventually I will combine several posts similar to this to create a 1 page hedge fund industry snapshot for professionals in the field, specifically for family offices and financial advisors who need to get up to speed on the latest developments.

• Not all hedge funds are risky relative to mutual fund, SMA, or ETF product alternatives
• There are around 10,000 hedge funds in existence with 30 new ones created each quarter
• Around 80% of all hedge funds have under $100M in total assets under management (AUM)
• According to Magnum Funds hedge fund returns have outperformed standard equity and bond indexes with less volatility and less risk of loss than equities
• Most hedge fund assets are being gained by the industry giants with over $2B/AUM
• Institutional investors make up a huge portion of the hedge fund investor base, their risk controls sometimes only allow them to invest in larger funds. They also have a great need for highly researched uncorrelated returns to safegaurd their assets. In fact the more research-heavy a large institution is the higher the chance will be that they invest in alternative assets such as hedge funds. This is ironic given the risky profiles they are given by the mass media
• Most hedge fund managers are highly professional and ethical
• Most hedge fund managers or portfolio management teams have backgrounds or unique information/experience advantages in the market.
• Many of the most talented traders and money managers start hedge funds because the payouts are higher for great performance. Yes, the investor pays more but they are also getting premium products. Would you try to find the cheapest surgean or least expensive childcare provider possible? Probably not. When results matter so does expertise and performance.
• Hedge Fund typically charge fees of 2% on base assets and 20% of any performance profits they bring in. Some hedge funds are only charging 1 or 1.25% base fees while they are still considered emerging managers.
• Minimum investments in hedge funds range from $100k to $50M depending on the clout and size of the fund at hand.
• In 2005 Absolute Return Magazine found that 196 hedge funds had over $1B in total assets under management (AUM)

- Richard

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A Sample of My Hedge Fund Articles

• Hedge Fund Industry White Papers
• Marketing to Institutional Investors
• Hedge Fund Seed Capital
• Hedge Fund Media Exposure
• Hedge Fund Seeding
• Raising Capital
• Third Party Marketing
• Marketing Hedge Funds
• Hedge Fund Sales
• Hedge Fund Press Release Contacts
• Hedge Fund Relationship Building
• Hedge Fund PR
• 3PM
• Top 9 Hedge Fund Database Selection Tips
• CTA Database
• Hedge Fund Ethics
• Types of Hedge Fund Investors
• Raising Capital With Tenacity
• Hedge Fund Public Relations
• Outsourcing Hedge Fund Marketing
• Institutional Hedge Fund Marketing
• 3rd Party Marketing
• What is a Hedge Fund?
• Sortino Ratio
• Asset Allocation Diversification
• Prime Broker Definition
• Emerging Markets Hedge Funds
• Hedge Fund Administrators
• Large Accredited Investors
• Omega Ratio
• Treynor Ratio
• Zero Coupon Bonds
• Alpha
• Portable Alpha
• Hedge Fund Investors
• Hedge Fund Research
• Distressed Debt Securities
• Hedge Fund Widget/Blidget
• Master-Feeder Fund Structure
• Hedge Fund High Water Mark Definition
• Credit Default Swaps
• Active Premium
• Sovereign Wealth Funds
• Hedge Fund Redemptions
• Hedge Fund Strategies
• European Expert Network for Hedge Funds
• Fund of Hedge Funds
• 130/30 Hedge Fund Resources
• Global Macro
• Multi Strategy Hedge Fund
• Event Driven Hedge Funds
• Green Hedge Funds
• African Hedge Funds
• 130/30 Hedge Funds See Rapid Growth
• Top 5 Hedge Fund Strategies
• Hedge Fund Investment Strategies
• Litigation Funding Hedge Fund Strategy
• Emerging Markets Hedge Funds
• Risk Arbitrage Hedge Fund Strategy
• Hedge Fund Litigation Funding List
• Warrant Arbitrage
• Arbitrage Investment Strategy
• • European Expert Networks for Hedge Funds
  • Hedge Fund Recruiters
  • Hedge Fund Analysts / Associates
  • Hedge Fund Sales
  • Chartered Alternative Investment Analyst (CAIA)
  • High Net Worth Investors
  • Chartered Financial Analyst
  • Corporate Event Planners
  • Hedge Fund Interviews
  • Hedge Fund Launches
• Family Office Wealth Management
• • Top 50 Hedge Fund Websites
  • Hedge Fund Databases
  • Hedge Fund Training Courses
  • Hedge Fund Associations
  • List of Litigation Funding Sources
  • Top 10 Hedge Fund Myths
  • Investment Blogs
  • Top 100 Hedge Funds
• Exchange-Traded Notes




• Private Equity in South Africa




• Dubai Investment Trend




• Family Office Wealth Management




• Hedge Fund Managers & Pedigree




• Hedge Fund Industry Networking




• Hedge Fund Domain Names & Websites




• Online Hedge Fund Communities




• Hedge Fund Blog




• Hedge Fund Fees




• Best Hedge Fund




• Hedge Fund Prime Broker




• Asset Management in Boston




• Hedge Fund Management




• Fund of Hedge Funds




• Separate Managed Accounts




• Unified Managed Account




• Capital Introduction




• Hedge Funds and Private Equity




• Hedge Fund Sales Positions

Let me know if you are looking for a specific type of hedge fund article and I can help guide you to one.

- Richard

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Networking within the hedge fund industry can be challenging, or maybe you disagree but you are constantly looking to create more powerful relationships. I want to help people connect, get answers to questions, and eventually help build a community around the Richard Wilson Hedge Fund Blog so that it is more than a long series of posts by myself.

4 Ways to Network Within the Hedge Fund Industry and Get Instant Results

1. Post comments under the blog posting that is most closely related to the type of person or group that you were looking to connect with. Everyone will instantly be able to see your contents and some people might email you directly or post a reply to your posted comment.

2. Email me at Richard@RichardCWilson.com or call me at 503.789.7901 and I will connect you with an individual I know or direct you towards a few possible next steps.

3. Write a guest article for the Richard Wilson Hedge Fund Blog. I currently have around 250 people reading my blog every day which is getting close to 100,000 visits/year. Write anywhere from two paragraphs to ten pages and if it seems to be in line with the topics I’m focusing on I will post it with a two sentence spot on who you are with your email address at the bottom of it.

4.

The Hedge Funds Group has been launched in conjunction with Linkedin.com. This group was formed in an effort to further connect hedge fund professionals to share business leads, provide consulting services, network, and share online resources related to the hedge fund industry.

Initially attracting mainly technology/IT professionals the site now boasts over 100,000 CEOs as members along with tens of thousands of investment and hedge fund professionals. Linkedin.com has over 5 million members and is growing quicker than Myspace and FaceBook. Below are some stats on the growth of Linkedin.com compared to other social networking websites that you might be familiar with:

Source: Nielsen Online

I have created a new group for hedge fund professionals who are on Linkedin.com. To join this network of hedge fund professionals and casual industry followers please click on the link below:

Linkedin.com Hedge Funds Group Invitation Link

- Richard

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