If you want to see ups and downs similar to the Dow, check out the public perception of Hedge Funds. A short time ago every MBA student dreamed of becoming a Hedge Fund manager and investors rushed at any opportunity to place their assets in the funds. Since then, Hedge Funds have been blamed for artificially inflating the price of oil last summer and for contributing to this looming recession. The media still hammers down the funds calling them "former masters of the universe," and how the compensation to managers is obscene. We have seen the same back track among investors as since assets were redeemed over $152 billion have been taken out of Funds, even ones with positive returns. Like any industry Hedge Funds have both their good and bad practices. Anyone who believes that Hedge Funds will disappear is living in a fantasy world? Quite the opposite will happen, in fact I see the Hedge Fund industry thriving over time as they continue to attract the best managers and the most sophisticated investors. Any regulation among this industry will come from within not from a form of SEC interaction. In fact, many funds are trying to become stricter on their policies. For instance, many want to impose further gates which will lengthen the time table before an investor can redeem their investment. Those who claim Hedge Fund are overpaid and that the '2 and 20' fee structure is overzealous have failed to analyze the annual returns of Hedge Funds compared to Mutual Funds and Stock Indexes. In 2008, Hedge Funds were down 19.98%, compare this however to the 40% deficit that the S%P suffered. On the contrary over 1/3 of the Hedge Funds managed to make a profit whereas only 1 out of 1,700 Mutual Funds made a profit in 2008. At the end of 2008, there was 50 times more chance that you would make money from a Hedge Fund compared to a Mutual Fund. What about these fees now? As for the number of funds among the world, currently 10,000. Expect too see this number dip down to 6,000 with many funds merging, etc. However long-term, we still have much room to grow among Hedge Funds as they are still very young among the Financial world. Many Politicians on both sides of the aisle have called for more oversight on hedge funds, including a suggestion for mandatory "registration." What would registration really accomplish? Most Hedge Funds outside the U.S. will continue to stay there and not need to register. All the big fund are registered and the Government tracks all there holdings. The middle funds have no point to be registered just for what registrations sake and so the government can handle a bunch of more data that they will do nothing with. For those scared of more Ponzi schemes, Madoff, was registered with the Securities & Exchange Commission. Maybe that is something that needs to be checked out the SEC? The hedge fund industry will work out its excesses carried over from the past five years and become a stronger collective of funds and fund managers. Most of the lame ducks will leave, until the industry once again begins to experience excessive growth. Oversight must and will improve. Lessons will be learned. And investors will continue to flock to hedge funds because the industry will continue to attract the best managers with the smartest strategies. Hedge funds can adapt to markets something funds lack which is why they will continue to deliver top-tier rates.
If you would like to further discuss this topic check out the link below which will direct you to a discussion board. Click Here
0 Comments:
Post a Comment