Hedge Fund Reader : Hedge Funds don’t see much hope at the end of the tunnel

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October 13, 2005

Hedge Funds don’t see much hope at the end of the tunnel

There is a lot of bad publicity about news related to hedge funds with a special focus its lack luster performance, unjustifiable higher fees and charges, and its declining influx of investors. Hedge Funds gained 2.29 per cent in July, August, and September compared to its small surge of 0.13 per cent in the first six months of the year, as per Standard & Poor's. While S&P 500 clocked 3.15 per cent in the third quarter after losing 1.70 per cent, whereas the US stock market 4.65 per cent in this quarter. However, mutual funds gave quick surprise by posting 4.4 per cent as per Lipper, Inc., a unit of Reuters. The future looks quite bleak for new money infusion in the sector, justifying from a study by Deutsche Bank, which showed that hedge funds are likely to take in only $40 billion in the next year, down from $123 billion in 2004. Reuters Reports:

For an investment of $1 million, a hedge fund can charge a $10,000 management fee plus a 20 percent performance of whatever gains the manager makes. And because hedge fund investing can be risky, clients often employ a consultant or fund of funds to help select the right investments, adding anywhere between $10,000 and $50,000 to the annual bill.

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October 13, 2005 in Research | Permalink