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December 27, 2005
Hedge Funds: Rumors Hint Slowdown
If the rumors and market speculations are to believed, the hedge funds industry asset growth is showing early signs of slowdown. The market speculations point towards a couple of reasons for the alleged slowdown. The first reason hinted was the fact that the equity markets have done well during the last couple of years, well at least better than the preceding years. The positive image of the equity market, which is pulling at the investor sentiments reportedly, caused a slack in hedge fund investment. Thus equities are reportedly back to being the favorable asset class for growth.
The second reason apparently is that the relative value strategy section of the industry suffered some tough months in the middle of the year. This was mainly related to General Motors in the US. Further, as numerous hedge funds reported poor returns or even closed and returned their money during that time period. These reasons resulted in a kind of bottleneck in terms of fund inflow into the hedge funds sector during that time. Moreover, industry source highlight that the next year is not likely to witness very high levels of fund inflows- no way near the levels witnessed over the last couple of years.
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