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January 06, 2006
Concerns over Hedge Funds Sustainability
Although there is a halo around the hugely popular and loosely regulated investment strategy called the hedge funds, industry skeptics give a warning signal and urge to tread with caution. The pertinent question that everyone seems to be asking nowadays is that are hedge funds the next big thing in mass investing? Will it actually break the barrier of being the investment vehicle of the super rich and go fully retail? And if so, will hedge funds suffer the same fate as the last big thing in mass investing — mutual funds?
This is one big concern that has emerged from all corners of the industry. Back in the 1990s, the mutual-fund industry doubled – with millions of new investors pumping in money in expectation of excellent performance. However, as of today, according to the Investment Company Institute, there are about 8,000 United States mutual funds, with about US $ 8.5 trillion in assets. Yet it is being reported that majority of the mutual funds under-perform vis-à-vis the market indices. Thus in spite of all the good will and expectation, there is the undercurrent of uncertainty for hedge funds.
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