WEST PALM BEACH, FL (HEDGECO.NET) – Prevailing trend less equity markets, high energy prices, and heightened security concerns have all cast a shadow over the ability of hedge fund managers todeliver absolute returns to their investors. While hedge fund returns have turned negative over the past four months, no one is predicting the so-called �Hedge fund bubble.� Many market analysts havepredicted that the exponential growth seen in the hedge fund sector would sooner or later moderate, giving rise to a time which has been described as a �consolidation period�.
There are concerns about capacity constraints giving rise to many funds chasing fewer opportunities, but others argue that this is an opportunity for hedge fund managers to show that they can actually perform under any market condition. A syndrome often referred to as �absolute return.�
According to Mark Konyn, �Being slightly better than average is no longer seen as a key to success. More than ever, fund managers need to demonstrate that they can stick to their investment approach in the face of changing investor perceptions and tastes�.
Many hedge funds now sit on the sidelines, waiting for market action and volatility to spike up prior to trading decisions. However, new assets continue to flow into hedge funds, according to forecasts made by Platinum Capital Management. They say the global hedge fund industry will grow to about US$4 trillion by the year 2010. This projection actually doubles the current estimate of about US$2 trillion made by Putnam Lowell, a US based investment bank.
While hedge fund returns have moderated significantly, hedge funds will continue to attract new investor interest in the years to come. This consolidation stage may lead to fewer hedge funds, managing more assets in the near future.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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