http://dealbook.blogs.nytimes.com/2007/06/28/milans-latest-trend-hedge-fund-chic/ my favorite sign is the hedgefund shoe... now they offer quantitative finance in college. someone once said something about when academics finally catches on, then the trend is over. this is what seemed to happen with computer science in year 1999 and 2000.
Just a heads up, but a hedge fund is just an investment vehicle. It is nothing more than an ownership structure...hedgefunds aren't a sector! There is no such thing as a top in investment companies/partnerships.
Ok, so you got us on a technicality. Here is what I would say is a good sign that there is a "top" coming" in the HF world...very simply that I'v been able to accumulate a rather good sized one. Now, this is not to say anything negative about me, in fact I think I work harder than just about anyone I know ( I work as hard as I spell bad ), I produce good returns, I'm an easy enough guy to get to along with blah blah blah. But, I'm also only 30 years old, I FLUNKED OUT OF COMMUNITY COLLEGE. Now granted I did manage to score a 1360 on my SAT, but to me somone flunking out of COMMUNITY COLLEGE with an Ivy League Calibre SAT would scream undermotivated. A few other things, I run my fund from my home office, the address of which has changed a few times in the last 10 years I've progressed on the updward mobility scans. I have three other people working for me, one of whom is a 19 year old Business Engineering (whatever the hell that means) major @ Columbia Unv...he is obviously part time. In fact the only ful timer is me. Now, the returns have beaten the market, even after fees, and we have done it with such low it oculd make somone hoped up on Meth fall asleep. Anyway, the point of all this is not to bash myself, which I suppose I did a fairly good job of doing- but its to point out that this used to be an industry with a barrier to entry, you had to earn your way into it and the cream rose to the top. I guess the best analalogy for hedge funds now is Indian Medical School Graduates (as I understand it..someone correct me if I am wrong). In India if you can afford to get into Med School..hey congrats, your a Medical Student who is going to be treating patietns. As you progress along in your studies and you kill/maim/scar/injur more and more people you move on and decide that maybe medicine is not for you (at least we hope you do)Contrast that to the US where you have to go to at least 4 yrs of Undergrad school and probably score in the top 10/20%, esp in science...then if you interview well, have activities etc etc, you MIGHT Get accepted to Med School. Used to be hedge funds kinda wokred along those lines too. There are good and bad to both I guess because I have turned out to be ok at this, and I love it. Had we been operating back under the old system them Id be managing a KFC someplace, and no It wouldnt be called KFC Capital Managment. Brandon
Brandon, I cannot say that anything you mentioned is indicative of a top. Is your situation any different than that of Joe Ritchie who was a philosophy of religion major that didn't take a math class beyond high school but built one of the largest and most successful option firms the street will ever see? Corporate America rewards degrees, not necessarily competence. The market rewards competence. If you have achieved success it is because you have demonstrated competence, not because of a perceived "hedge fund top." In my estimation the hedge fund business will continue to grow as we have yet to really see the lower echelon of accredited/qualified investors get into alternatives in a serious allocation. That is before we consider SPAN, elimination of the tick test, and the ever-evolving securitization of hedge funds. Keep up the good work.
The "top" can have more to do with compensation that managers receive. The mediocre people who get "2 & 20" and underperform their benchmarks will become compelled by their investors to come down to "zero-point-five & 5". Otherwise, investors will mostly be better off putting their money into an index fund.
I think of hedgefunds as an asset class... A type of instrument that a trader could invest in. Hedgefunds work for investors. Without investors there would be no hedgefund. So an ideal portfolio would include many different types of investments such as stocks, bonds, options, forex?, realestate, hedgefunds, etc...... & many others.
SP500 Index June 2007: 1,540 Today: 1,240 52wk high: 1,576 52wk low : 1,225 posted by ByLoSellHi Even the Legends Are Losing in Today's Markets Graham Summers July 11, 2008 Yikes. If anything reveals the difficulty of investing in todayâs market, itâs the fact that investing legends have been losing money hand over fist. The market has fallen over 12% in the first six months of 2008. Meanwhile, many of the worldâs greatest investors have lost more⦠a lot more. The Website www.Gurufocus.com tracks the investments of the worldâs greatest investors. All told, it follows 55 investors, everyone from Warren Buffett to Seth Klarman, the super secretive manager of Baupost Group, who has averaged 20% a year for more than two decades and only posted a single losing year in the bunch. All told, only four of the 55 made money during the first six months of 2008. Let that sink in for a moment. The best of the best are losing money. Some of the biggest names in the bunchâguys like Marty Whitman and Eddie Lampertâare trailing the market by as much as 20%.
The hedge fund "growth bubble" of the last several years is ripe for a severe decline, maybe a collapse. The only reason that so-called hedge funds (2 plus 20, or more) have attracted so much AUM (assets under management) over the past 7 or 8 years is because the dot.com mania led to a stock market crash (well deserved) and as a result the trustees of all the big INSTITUTIONAL MONEY (pensions, endowments, etc.), observing that their long-standing "white shoe" money managers were getting killed, decided to swing money over to the "hedge fund" managers, who are NOW GETTING KILLED. The stupidity of these so-called "professional trustees" is beyond belief.