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Hedge Fund Returns

Hedge Fund Returns

Hedge Fund Returns

Hedge Fund ReturnsMany mainstream, well respected media outlets jump at any chance to dance on the graves of hedge funds who have recently shut down or seen poor performance. This comes at the cost of showing a realistic macro view of the health and growth of the hedge fund industry. I have mentioned this several times before and it is one of the reasons why I write in this hedge fund blog. Here are some of those related articles:

The Euromoney Institutional Investor Network seems to think along similar lines as myself as they published an article earlier this month on how claims of the demise of the hedge fund industry are highly inflated. Their article was written in response to a FT article by Martin Wolf. Martin Wolf is one of the FT's leader writers, and wrote: "Hardly a week goes by without the implosion of a hedge fund. Last week it was Carlyle Capital, with an astonishing $31 of debt for each dollar of equity. These collapses are inherent in the hedge-fund model. It is even conceivable that this model will join securitized subprime mortgages on the scrap heap."

Since there are over 15,000 hedge funds applying over 200 distinct strategies with performance beating most mutual funds, equity benchmarks and slew of other investment types I don't see them going anywhere any time soon. At worst I see a small contraction in the fees that mid-market hedge fund managers are able to charge.

Riskdata, a risk analytics firm agree stating that hedge fund returns"show massive outperformance" by hedge funds for more than 15 years. "They outperform all asset classes, even after payment of all management and performance fees to the fund managers." Riskdata also said "Simply consider the following fact: the worst month for hedge funds has been Long-Term Capital Management (-7%), the worst day for equity has been black Monday (-20%)." "Mutual funds lost much more in the recent period than hedge funds. Hedge funds are so far the best investments to secure our pension plans—considering their long term performance. One could say that just going back to the old world would be like going back to old monopolistic telecoms as an answer to the Worldcom bankruptcy."

Bottom line. When you read about hedge funds disappearing or "imploding daily" check the real data on what is going on through a major hedge fund database before believing what you read.

Read more articles like this within the Hedge Fund Performance Category of this hedge fund blog.

- Richard

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