It was quite a year for hedge funds, as they increased their assets under management to an estimated $1 trillion across 8,000 funds, according to Slate Magazine.
But are hedge funds following in the footsteps of their mutual fund rivals?
In the 1990s, the mutual fund industry almost doubled, and so did investors' confidence in them. Their impressive performance numbers seduced new investors, but these days mutual funds have largely grown beyond the abilities of their managers to run the money successfully. As such, the industry has come to rely more on marketing and management fees, Slate Magazine offers.
Hedge funds are following mutual funds into this patchiness. One reason: there is very little volatility in the markets and that's not good for hedge funds, which make money from short-term movements in the markets.
"Hedge funds, like mutual funds, are also victims of their own success," the magazine proclaims. They make money by making use of tiny inadequacies, it continues. For example, they pile into stocks that are rated low, or build up stakes in companies that are weak, and then put them up for auction.
Also, hedge funds have lost their mystery. Hedge fund managers once coveted secrecy, preferring to be left alone by the media, the general public and, in particular, the Securities and Exchange Commission; but recently many of these same mangers are talking publicly about their investments and most must now register with the SEC.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.