WEST PALM BEACH, FL (www.hedgeco.net) – A new released report has suggested that US based hedge fund managers must grow in size regarding the level of assets under management to stay competitive inthe fastly evolving and growing hedge fund industry. The Tabb Group report noted that after lagging the broad stock market indexes in 2003, and 2004, hedge fund managers may have to introduce a newrange of trading strategies to enable them to rapidly shift exposures in order to boost returns.
Josh Galper, a consultant at the Westborough, Massachusetts-based firm, said, “By operating as a fund of funds trading multiple strategies, it is possible to move capital around internally to capture the best opportunities at the moment.� Galper also noted that, �Soon hedge funds will need more money to invest and the smaller players among the worlds estimated 8,600 funds will struggle to compete with managers boasting as much as $30 billion in assets under management.�
The report included interviews with executives of selected 63 hedge fund managers. The survey noted that many hedge fund managers turned away from new investors when their management assets reach their projected levels; subsequently their funds are closed to new investors. Generally hedge fund managers close their funds when assets reach the level of $1 billion.
Emphasis to remain small resulted from the experiences learnt from the collapse of the Connecticut based Long Term Capital Management in 1998. Such collapse was also linked to the size of assets managed by LTCM. The new report noted that after years of trying to stay small, today many managers seem to be adopting the model that �big is better.�
The new Tabb Group report also noted, �We see funds of hedge funds acquiring small funds under their umbrellas. We also see large hedge funds moving into the fund of hedge funds model as they are unable to effectively deploy their own capital.� The report also said that size alone will not enable hedge fund managers to make money, however the managers will be spending more money in the area of analytics and research to enable them identify new trading opportunities faster. The new report costs $8,000 per copy.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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