WEST PALM BEACH, FL (HEDGECO.NET) – Many analysts and hedge fund managers see steady growth for the hedge fund industry despite the current challenges confronting the industry. According to Reuters,analysts and fund managers believe hedge fund portfolios will continue to see long term growth in the coming years. Hedge fund trading assets have risen from about $50 billion in 1990 to over $1trillion in 2004. The number of hedge funds around the globe also rose from about 600 to over 8,000 during the same period.
2004 has proved more challenging to the hedge fund industry; industry tracking firms such as MSCI Hedge Fund Index have managed to post returns of about 2% during the first three quarters of 2004. Over the past three years, the MSCI Hedge Fund Index has returned an average of 7.5%. Market watchers blame low volatility levels along with lackluster performance in the global equity markets as partly responsible for the poor performance of hedge funds. There are also concerns about capacity constraints in the industry, many worry that the number of hedge funds operating in the global exchanges have outgrown the available trading opportunities in the markets.
Donald Sussman, chairman and chief executive officer of U.S.-based Paloma Partners Management, said, �The additional capital has hurt hedge funds across the board … Trades have become less profitable.” Sussman however warned that it would be costly and inappropriate to react to the 2004 results, adding, “I have spent a quarter of a century in hedge funds. I do believe in the value of hedge funds as an asset class.”
Another former veteran hedge fund manager and co-founder of the Quantum Fund with George Soros said that about 10,000 hedge funds were now vying for investors’ attention worldwide. Soros added, “We can’t have that many smart 29-year-olds in the world. When you have everybody flocking to the same goal line, you will have charlatans, you will have incompetents.”
Other managers� hold opposite views, Joel Katzman, president and CEO of J.P. Morgan Alternative Asset Management believes the industry still has room for additional growth. He said, “The players will change, but make no mistake, they will grow over time, there’s lots of room for hedge funds to grow larger.”
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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