Weekly Newsreel
Apr 10th, 2008 | Filed under: AAA Newsreels, Hedge Fund Industry Trends“Hedge funds come unstuck on truth-twisting”: Aussie newspaper The Age provides a great example of why AIMA felt compelled to put its foot down on anti-hedge fund hype yesterday. The article covers a recent academic study and starts with “Has the hedge-fund industry been built on a series of lies?” and continues on to proclaim, “Now it looks as if the industry might be based on a more systematic falsehood”, “The conclusion? The promise on which the industry was built looks to be largely a false one. If investors start to question the hedge funds’ ability to produce consistently superior returns, they will start to exit the industry in droves - and rightly so.” (see November ‘07 posting on this study)
“Tough Times for Hedge Funds”: Reuters provides another prime example. Says this promotional story for its hedge fund summit this week: “Many investors expect the $1.8 trillion industry’s estimated 10,000 funds to be winnowed down by a few thousand in a few years. Funds that oversaw nearly $4 billion in assets have already closed their doors in the first quarter of 2008.” Only a couple of problems: A) The number of players in any new industry is always “winnowed down” as it matures and says nothing about the overall size of the industry and B) $4billion x 4 quarters = $16 billion = if true, the lowest attrition rate in 3 years…
“First-quarter redemptions hit hedge fund industry”: While we’re on the topic, Dow Jones says “Hedge funds overall recorded losses in the first quarter, particularly in January and March. They lost 2.78% of their value in the quarter after dropping 2.46% last month, according to the investable global hedge fund index published by US data provider Hedge Fund Research.” While ugly compared to the positive returns people have come to expect from hedge funds, this pale in comparison to the S&P 500’s Q1 loss of over 7%.
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