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July 11, 2005
Hedge Funds industry due for shakeout
The $1 trillion Hedge Fund industry is moving towards a shakeout. KPMG and research firm Create said that because of inflows of big funds in the industry, charges are more likely to be pushed down and the industry is due to be consolidated in the next three years. Recent times have seen a boom in the industry due to the inherent ability to show returns in a bear market. But the current clear market trends devoid of volatility have led to some wearing off of the shine from the these funds. Investors have gotten used to seeing double digit returns but the same seems unlikely for long. Due to inconsistent performance, in the last few months, some firms like Bailey Coates have been forced to close down a number of Hedge funds including its US operations. This Hedge Fund sector, according to one estimate, has around 8000 firms operating in it. The quantum of money pouring into these funds is likely commoditise the sector thereby making them less lucrative investment options. Reuter.co.uk reports:
“These free-wheeling portfolios have boomed in recent years due to their ability to make returns in bear markets, but the pace of expansion is likely to ease off as performance slows down, the report said."
Read More: Hedge funds to consolidate over next three years
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