Since January 2005, a total of 2,622 new hedge funds have been launched, according to a report by Hedge Fund Research Inc., released on wednesday. But figures also show that 1,071 hedge funds have shut in the past two years, as competition has squeezed profits.
Even some veteran managers, in a bid to boost returns, have made concentrated bets that have backfired, two funds set up by Hans van Hoof, the former Europe chief of Soros Fund Management and another fund run by Thierry Serero, a former manager at Fidelity Investments’ Fidelity Europe mutual fund. All this has set up the $1.23 trillion industry for its first meaningful consolidation, Wall Street executives say.
In just the past few weeks, Amaranth Advisors LLC lost $6 billion, and Narragansett Management LP in New York said it will return $800 million to investors, two European based hedge funds recently have told investors they are shutting down one or all of their funds, also the Vega Select Opportunities fund, which manages about $1.4 billion, lost about 11.5% of its value in September.
The fund closures, which stem from a variety of reasons, underscore a numbing fact about the hedge fund business: Even though new hedge funds seem to be popping up every day, almost half as many funds have been closing their doors since 2005.
About 300 hedge funds manage more than $1 billion each and represent roughly 90 percent of the assets in the industry today. “In the older days, raising $100 million was great,” says Richard Portogallo, head of U.S. stocks at Morgan Stanley. “Now it is not going to be good enough.”
HFR said a record $42.1 billion was added in the second quarter after $24 billion flowed in during the first quarter.
Hedge Fund Research Inc. is a firm specializing in the aggregation, dissemination and analysis of alternative investment information. The company produces HFR Database, the industry’s most widely used commercial database of hedge fund performance, as well as other research products for the alternative investment industry.
5 Oct 2006
Hedge Funds and Australia
UBS hosted a Melbourne conference last week, attended by hedge funds FrontPoint Partners, Highbridge, Och-Ziff Capital Management, Pequot Capital and York Capital.
Finance Minister Nick Minchin said at the conference. “We have a very strong financial services industry,....and hedge funds add an extra dimension to that industry…..The critical thing with all investments is that people understand the risks….In terms of the investment marketplace, hedge funds have a critical role to play.”
In a report published in The Australian, Robert Clow writes, “Given the immense amounts of money that hedge funds have been able to raise and invest in the US and Europe, it is not surprising that they have mostly concentrated on those markets until now. But hedge funds now have so much money to put to work and the developed markets are so well-mined that they have turned increasingly to the Asia Pacific region.”
Hedge funds Fortress Investments and Tudor Investments already have Australian operations running. But more often the foreign firms parachute in, taking positions remotely from their external offices. One attraction in the market for merger is 45% of Australian takeover deals attract increased bids, according to the presentation at the UBS conference, compared with 5 to 10% of US deals.
The Australian industry manages $35 billion in hedge fund investment, according to a study compiled earlier this year by Axiss Australia. Another study completed in April by the University of NSW forecast that Australian investors would increase their hedge fund investment by 41% over the next 2 to 5 years.
Finance Minister Nick Minchin said at the conference. “We have a very strong financial services industry,....and hedge funds add an extra dimension to that industry…..The critical thing with all investments is that people understand the risks….In terms of the investment marketplace, hedge funds have a critical role to play.”
In a report published in The Australian, Robert Clow writes, “Given the immense amounts of money that hedge funds have been able to raise and invest in the US and Europe, it is not surprising that they have mostly concentrated on those markets until now. But hedge funds now have so much money to put to work and the developed markets are so well-mined that they have turned increasingly to the Asia Pacific region.”
Hedge funds Fortress Investments and Tudor Investments already have Australian operations running. But more often the foreign firms parachute in, taking positions remotely from their external offices. One attraction in the market for merger is 45% of Australian takeover deals attract increased bids, according to the presentation at the UBS conference, compared with 5 to 10% of US deals.
The Australian industry manages $35 billion in hedge fund investment, according to a study compiled earlier this year by Axiss Australia. Another study completed in April by the University of NSW forecast that Australian investors would increase their hedge fund investment by 41% over the next 2 to 5 years.
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