What is Not Said About Hedge Funds

What is Not Said

What is Not Said About Hedge Funds

While looking for interesting posts for the hedge fund newsletter today I realized there are many topics not being discussed in detail. While there are 30 articles about how hedge funds never really hedged their investments and many more on asset losses few discuss these points:

Hedge funds have lost far less than the average bank. Banks are supposed to be the highly regulated and less risky vehicles here. This is important to note as more regulation is considered for the hedge fund industry. Joe the plumber has money with these banks in multiple ways through his 401K, mortgage, etc. He does not have any money invested in Perry Capital, DE Shaw or Renaissance Technologies.

There are 4 reasons why hedge funds are going to explode in growth and recover their losses in 2-3 years.
  1. Hedge funds are sitting on cash right now instead of being able to grow it - this stalls their asset raising efforts right now and makes it more likely that investors will simply want their money back to manage their cash themselves.
  2. Hedge funds have lost far less than the market, banks and in some cases real estate investments as well. Once the dust settles the daily headlines of fund closures will stop and the reports on how hedge funds have still be outperforming their competitors will again be seen more often.
  3. Investors are sitting on cash and will want to deploy that after the market turns around in 1-2 years. When that happens, hedge funds will immediately experience a 20% raise in their assets under management.
  4. When the stock market does correct, hedge funds will be there first and in larger numbers than ever before.
This is not to say hedge funds are a great investment or something everyone should consider, but I hear hedge fund managers and marketers speak to the points above - yet rarely see this view within the mainstream media outlets.

Do you agree? Am I way off base from what you predict will happen? Please answer with a simple yes, no or explanation of your views below within the comments section if you have a minute.


Anonymous said...

Agreed, as long as the markets don't stay flat or negative for 5-6 years, that is the real fear here.

- K

Anonymous said...

I have no idea, nothing that I thought would happen has.

Anonymous said...

What about all the Lehman babies, and other financial layoffs? How many of them will decide to start hedge funds as well?

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