Hedge Fund Reader : Barclays’ states hedge funds are no bubble about to be burst

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October 13, 2005

Barclays’ states hedge funds are no bubble about to be burst

There has been a lot of uncertainty looming over the future of hedge funds. The primary factors to the same could be attributed to declining returns due to increase in competition and lack of straight run-away investment opportunities. Although there has been skepticism in the minds of investors for investing into hedge funds who typically have high management fees and charges. Again due to declining returns, hedge funds no longer benchmark their returns with the market indices and now compare their returns on absolute basis. There has been fear in the market that with declining returns, there could be a stage where hedge funds would accumulate more assets under its portfolio and diversify returns. This may remind people of the collapse of Long Term Capital Management (LTCM) in August 1998, and instill fears in the minds of the investors. Although, Barclays Capital reassures that the hedge funds are not bubble build-up about to burst, they are here to stay and generate returns efficiently. Reuters Reports:

"There is a lot of hype about them being a cyclical bubble...That they are going to blow up and are going to be a systemic risk," Diamond said, adding that hedge funds were here to stay. "It's as clear as night follows day." He said hedge funds were a growing part of Barclays Capital's business and that they were changing the face of the asset management industry. "We're in the throes of a secular shift," he said.

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October 13, 2005 in Research | Permalink