By Michelle Celarier
In the premier issue of Absolute Return, March 2003, our cover profile of Louis Bacon and Moore Capital Management became the focus for a discussion of the critical topic of hiring and retaining talent. Ever since, we've continued to report in depth on the incredible story of the hedge fund industry - its star managers, the many challenges that have accompanied the huge growth and institutionalization of the business, the industry's battles with Washington, the stunning performance of many funds, the megalaunches and the big blowups.
It has been a wild ride. When we first began tracking U.S. hedge fund assets, 100 firms with at least $1 billion each had assets under management of $310 billion. Although assets fell by a third last year - the worst-ever for the industry - our Billion Dollar Club still counted 212 members managing a total of $1.134 trillion. Even in their darkest days, hedge funds outperformed the market, and they are coming back strong. In May, hedge funds were up a median of nearly 3%, one of the best months for the industry in more than a decade.
Now a sea change is under way. Hedge funds are going through a period of consolidation as they rethink their strategies and ways of doing business. They face more government intrusion and increased demands from investors. Fees and terms are starting to bend, and we are reporting on these changes every step of the way.
This new world led us to profile Sweden's Brummer & Partners, this month. Why? We think Patrik Brummer has a few things to teach U.S. managers. Whereas American funds fended off regulation for years, Brummer embraced it from the start. He has kept his funds' fees modest and the process transparent, and guess what? Swedish investors have jumped into the local onshore hedge fund market in a big way. Brummer's performance has excelled and he is no small fry either. Now the firm boasts $5.6 billion in assets.
Back in the United States, we are also finding some surprises from Elliott Associates' Paul Singer, known as much for his extremely conservative political views as his shrewd maneuverings in distressed debt around the world. Many were surprised by the position he took on the Chrysler restructuring (he was one of the first senior creditors to agree to the Obama administration's plan) and his support of tighter regulations and lower leverage in the banking industry. That's the type of conservatism we like to see - one that actually protects the financial industry instead of fleecing it.
Like the hedge funds we cover, we are not standing still. Beginning with the next issue, Absolute Return will be merged with sister publication Alpha to create a brand new product, AR: Absolute Return + Alpha. Both magazines are part of the Euromoney Institutional Investor family, with Alpha published by Institutional Investor and Absolute Return by HedgeFund Intelligence. Together, II and HFI are creating a magazine and online service that will offer readers everything they're used to seeing in Alpha and Absolute Return - and much, much more. As the editor of this exciting new venture, I want to thank Alpha editor Mike Peltz and his team for the great work they've done and their support of our joint effort. I will continue to update you on the progress of our new magazine, which will be published in September, along with a revitalized web offering.