Sunday, March 27, 2005

Times on hedge funds

NYTimes: [The numbers are mind-boggling: 15 years ago, hedge funds managed less than $40 billion. Today, the figure is approaching $1 trillion. By contrast, assets in mutual funds grew at an impressive but much slower rate, to $8.1 trillion from $1 trillion, during the same period. The number of hedge fund firms has also grown - to 3,307 last year, up 74 percent from 1,903 in 1999. During the same period, the number of funds created - a manager can start more than one fund at a time - has surged 209 percent, with 1,406 funds introduced in 2004, according to Hedge Fund Research, based in Chicago...

"Hedge funds are an innovation of compensation," said one fund-of-funds executive. "It's a compensation system, not an asset class."

...In the same way that there is no quelling the bulls, there will be no quieting of the critics. The Horvitz family of Cleveland, which made its fortune in road construction, media and real estate, started investing in hedge funds in the 1990's. A decade or so later, it has virtually no money in such funds, said Jeffrey Horvitz, who oversees his family's investments. Too often, he said, the funds produced disappointing returns.

"Hedge funds are no longer attractive," Mr. Horvitz said, noting the influx of start-ups. "I see no relief in sight, especially for taxable investors like us."]

See previous posts here and here, and many others ;-)


Anonymous said...

We spoke to this matter before, but there is more thought needed. The hedgers have found a sure way to be richer, except that as the hedgers become the market, returns for them must be the market before costs and well below after costs. But, how much leverage is being used and how difficult to unwind if unwind they must?

International students have been flying about the world to attend hedge fund seminars, so they will be able to handle family accounts properly.


Anonymous said...

How much can you really afford to give away to the market in costs?


Anonymous said...

im realted to jeffery horvitz

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