Bursting Another Sort of Bubble
| Oct 27th, 2006 | Filed under: Hedge Fund Industry Trends, Media Coverage of Hedge Funds | By: Alpha Male |
|
By: Allan Sloan, Newsweek
Published: October 30 Issue
Newsweek’s Allan Sloan, “The Cruncher”, offers up some pretty weak evidence this week that a bubble exists in hedge funds:
“Day after day, I hear about hedge funds’ growing power—we’re up to almost 9,000 funds with $1.225 trillion in assets, according to Hedge Fund Research, from about 3,600 with $456 billion at the start of 2000. To you, this may mean they’ll grow forever. To me, it feels like something bad’s about to happen.”
Firstly, as we have discussed on this blog, the industry became quite concentrated between 2000 and 2006 (as the mutual fund industry did years earlier). As several respected institutional investors have told us recently, there are really only about 700-1,000 funds that would make it onto an institution’s investment radar screen (not 9,000). And according to research by Alpha Magazine, large segments of the industry actually shrank between 2004 to 2005.
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
