Hedge Fund Reader : Hedge Funds tend to loose its sheen but touch the $1 trillion mark

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August 28, 2005

Hedge Funds tend to loose its sheen but touch the $1 trillion mark

The term Hedge Fund resounds of a type on investment supposedly for the rich and the wealthy and giving them phenomenal return on their investments. But scenario has changed, now the minimum amount required to invest in a hedge fund has been reduced to just $25,000, or less investments in shares that invests in multiple hedge funds. As per Hedge Fund Research Inc., there existed about 600 hedge funds with and estimated $38 billion in assets in 1990 and has seen a phenomenal to around 8,000 hedge funds, with more than $1 trillion in assets. But the investment in hedge funds has dropped sharply from $24.6 billion in net new assets in to $11.6 billion in the second quarter this year. The returns are also a lackluster and are way of the mark. But his has not dejected investors and newer financial institutions like pension and endowment funds have been the part of the current hedge fund investment spree. Virginia Retirement System has invested approximately $1.6 billion accounting for nearly 4 per cent of its assets; Baltimore City Fire & Police Employees Retirement System has put an estimated $80 million into hedge funds last year, while the City of Baltimore Employee Retirement System has invested around $55 million representing nearly 5 percent of its assets. But there are new players like Maryland State Retirement and Pension System who do not prefer to take the risk considering the uncertainty involved by investing in them, since the 1998 horror stories of Long Term Capital Management’s collapse do not die soon.SFGate.com

Spencer acknowledged that the Baltimore pension is getting into hedge funds at a time when returns are flat. The average hedge fund is up about 4.1 percent so far this year, according to Hedge Fund Research, far below the 15- year average of around 15 percent. "We are hoping that it can't get worse," Spencer said of recent hedge fund performance.

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August 28, 2005 in Gossip & Scandal, Regulation, Strategy | Permalink