Saturday, April 30, 2011

More about Hedge Funds, Their Costs, and Their Net Investment Returns

Last month we blogged here about changes in the prospects for hedge funds.  Following-up on that post, an excellent, general overview column by Scott Burns about hedge funds, their costs, and their average net returns is available here.

A prediction:  the remarkable growth in the hedge fund business over the last two decades will prove to be a generation-long fad.  There's ten more years or so to go.  Most hedge funds will close.  A very few will thrive by exploiting market anomalies.  Some will evolve into other types of high-priced financial services firms.

After more high-profile closures -- resulting from lackluster returns or, worse, blow-ups -- institutional investors will become reluctant to allocate capital to hedge funds.  And investment policy allocation percentages for hedge funds will be substantially smaller that what those percentages are in 2011.


An interim update to the prediction above that some hedge funds will evolve into other types of high-priced financial service firms:  "[a]nd so we're seeing more and more hedge funds announcing they're entering the mutual-fund business. While this may smack of desperation ... ."  (Barron's, July 30, 2012)          

No comments:

Post a Comment