Hedge Fund Reader : New survey not optimistic of good performance of Hedge Funds

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August 16, 2005

New survey not optimistic of good performance of Hedge Funds

A recent survey by French business school Edhec shows that the future of hedge funds is not quite bright in the next five years. The results were collated after in depth interviews with 183 Hedge Fund Managers. The survey revealed that more than 65% of the fund managers interviewed said that the industry’s assets will grow by a minimum of 10% in the next five years. That will bring the quantum of assets managed to over $1.6 trillion. That is a very big number when you look at it from the point of view of the number of opportunities that are or will arise due to mispricing in the market. The capacity constraints will not allow every one to go back happy and the returns will be no where near those seen a couple of years back or nearly as good as that being seen today. On the flip side some comment that the current slowdown is a result of a cyclical tendency and that the returns will grow amidst the fight. Volatility in the market leads to mispricing and the hedge funds exploit this very phenomenon expecting the values to come to fair value. Today.reuters.co.uk reports:

“Like the recent one in the convertible bond market, mainly populated by hedge funds, which over the last 1-1/2 years have mostly returned flat or negative numbers because of a dearth of new issues and low volatility.”

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August 16, 2005 in Research | Permalink