Survival of the fittest

Mon Mar 31, 2008


A small group of $100 billion firms could dominate a $7.44 trillion hedge fund landscape by 2013. Will high returns persist, or could the industry finally experience a colossal correction and see both performance and assets plunge? What will the industry look like and will it ultimately be a healthier place?


If $100 billion giants dominate the future, can high returns persist? By Sarah Wood Always defined by elite status, with sky-high fees, superrich investors, brilliant managers and broad freedoms to invest as it pleased, the U.S. hedge fund industry over the past several years looked as if it might be turning into a more democratic place. For starters, low barriers to entry and an influx of institutional money desperate for better returns in the wake of the tech bust produced an unprecedented increase in the number of funds and a fivefold gain in the assets of firms with $1 billion or more under management. This growth, in turn, put performance, and therefore fees, under pressure. Then there was the minimum income requirement, which became less meaningful as personal wealth rose, helping attract the attention of regulators. And demands by institutional investors threatened to take away the privacy and unique character of the...

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