Hedge Fund Reader : Some Facts About the Hedge Fund Industry

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July 18, 2006

Some Facts About the Hedge Fund Industry

hedge fund industry is estimated at $1 trillion and growing at 20% per year with approximately 8350 active hedge funds. Hedge fund industry includes a variety of investment strategies. Some of these strategies use leverage and derivatives while others are more conservative and employ little or no leverage. Most hedge fund strategies reduce market risk by shorting equities. Hedge funds rely on the specific expertise of the manager or management team.

Performance of many hedge fund strategies is not dependent on the direction of the bond or equity markets. It is different from the conventional equity or mutual funds. There are a large number of hedge funds that are limited as to how much capital they can successfully employ before returns decline. Hedge fund returns over a sustained period outperform standard equity and bond indexes with less volatility.

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July 18, 2006 in Emerging Markets | Permalink

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We have been reporting this number since a few years now...according to my research, 15% of hedge funds closed down in 2004, 25% closed in 2005 and as of 2006 a 8750 funds' database proves that only 4800 approximately are still active. Many smaller hedge funds operating mainly in Cayman, Bermuda and Bahamas are amateurs and have no risk management.
Globally, now that they have to provide some sort of basic risk management compliance, many are shutting down and do not wish to have their returns published with some well known databases. They pocketed their speculative profits and ran. Operational risk failures similar to those uncovered by the SEC occur in almost all them in some way or another. This is a sad reality.

Posted by: anonymous | Jul 20, 2006 12:09:52 AM