Mike, your skills are in demand: [but I know you're too lazy -g-]
<<Hedge funds, those funds designed to give investors some protection in a down market, now are suddenly in great demand. In fact, he hedge fund industry is being
threatened by its own success, with unprecedented demand beginning to stress the industry, said George P. Van, chairman of Van Hedge Fund Advisors International,
Inc. (VAN), a leading hedge fund investment advisory firm.
VAN estimates that presently there are approximately 3,800 US-based hedge funds managing $159 billion, while offshore hedge funds number approximately 1,700 with
$136 billion under management.
"One of the things we do as a hedge fund research and advisory firm is to introduce institutional investors and wealthy individuals and families to what we believe to be
some of the best-performing hedge funds worldwide," Mr. Van explained. "So, it's with some concern that we're observing signs of stress in the industry. An increasing
number of hedge funds are closing their doors to new investors; some managers are changing their strategies or adding new strategies to accommodate more money;
and in some cases, we are seeing returns degrade in funds that previously had outstanding and very steady records."
An extreme example of a hedge fund closing its doors to new investors was the fund started by Magellan's Jeffrey Vinik. After opening its doors to new investors in late
1996, Vinik raised his asset target of $800 million within months and closed his fund to new investors.
"In contrast, many hedge funds that have recently turned down new money are much smaller, in the $75-$300 million range," Mr. Van noted.
There are several factors driving the growth in investor demand for hedge funds, according to the hedge fund expert. "First and foremost, I'd have to say that, worldwide,
liquidity is strongly driving demand for hedge fund investing," Mr. Van said. "Not only in the U.S., but in many parts of the world, investors are awash in cash, in part due
to gains made this decade in the stock markets of many countries. This cash has to be invested to keep growing and people are electing to diversify their holdings and include some hedge fund investments.
"Given the relative instability in the market here and elsewhere this year, another reason is the inherent risk protection offered by many hedge funds; the average U.S. hedge fund has strongly outperformed the S&P 500 over the S&P 500's past six down market quarters since January 1, 1988," Mr. Van indicated. "In addition", he added
"the investing public is realizing that many hedge funds, unlike the excellent-returning but quite volatile Soros model, are designed to produce steady returns.">> |
