Hedge funds starting to get “voted off the island”
Jun 19th, 2008 | Filed under: Hedge Fund Industry TrendsAs the hedge fund industry matures, assets are flowing disproportionately to the larger players in what some have called a “shakeout”. Taking a page from TV’s “Survivor”, investors are apparently starting to vote smaller players off the (Manhattan) island.
Usually, the term “shakeout” refers to the culling of weaker, smaller players in an industry in favour of the larger and more dominant competitors. So it’s striking that Business Week this week suggests that the “parade of cave-ins” in Hedgistan included funds managed by major financial institutions (e.g. Citi, UBS, and parade-marshal Bear Stearns).
The ones doing the culling? Pure play asset managers such as Bridgewater and BGI. In fairness, JP Morgan (which bought and subsequently grew Highbridge) and Goldman (which today announced its hide was saved in Q2 by its asset management business), buck the trend. But 8 of the top 10 largest hedge fund managers in Alpha magazine’s listing of the largest US hedge funds last month were NOT run by investment banks or other large financial services firms (we’d say that #9 BGI runs pretty independently of Barclays). So the question remains, what’s up with the bank-run hedge funds?
Despite a rocky road for some bank-owned hedge funds, size continues to be an advantage. Reports BusinessWeek:
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[...] “Despite a rocky road for some bank-owned hedge funds, size continues to be an advantage.” (All About Alpha) [...]
[...] “Despite a rocky road for some bank-owned hedge funds, size continues to be an advantage.” (All About Alpha) [...]
I think managed money is at an end of a bubble. The big established funds are going to get all the money and some are going to blow up before this bubble deflations. Over a 10 year period most don’t beat the SP 500 anyways.
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