"[It's] an interesting time for the industry. The press is full of negative stories about blowups, falling assets and poor performance. Yet new funds are starting daily and the big institutions are showing real signs of allocating vast sums of money to hedge funds." Sound familiar?
That's how HedgeFund Intelligence founder Iain Jenkins summarized the industry when launching Absolute Return in April 2003. Times haven't changed much in the decade that followed: the mainstream press still smugly points to the industry's underperformance relative to market indices and focuses on high profile crashes and investigations. At the same time, more money than ever is pouring into hedge funds from underfunded public pensions and other institutions hoping to limit volatility and boost returns.
So while the hedge fund industry has profoundly changed in the 10 years Absolute Return has covered it as firms grew larger than ever before and wealthy investors were replaced by institutions, many of the same themes persist. Topics in the inaugural issue included Steve Cohen's secretive trading strategy at SAC Capital Advisors; how Louis Bacon's Moore Capital was building his team; the struggles of equity managers amid volatile markets; and "Facing up to a new world of regulation."
The biggest names of 2003 have largely survived. Caxton Associates, Citadel, Angelo Gordon & Co. and Moore Capital Management continue to manage billions of dollars, but they have been pushed aside at the very top by Bridgewater Associates, J.P. Morgan Asset Management, Och-Ziff Capital Management Group and Baupost Group, to name a few. We've charted the Top 10 of 2003 to see where they are now, and shown how far The Top 10 of 2013 had to travel to sit atop the industry.
Those institutional-friendly firms have taken advantage of ballooning industry assets. Firms that managed at least a billion dollars, as measured in Absolute Return's Billion Dollar Club, totaled $467.7 billion on January 1, 2004 and the top 100 firms totaled just $309.6 billion on December 31, 2002. In 2013, some 269 firms managed $1.46 trillion in hedge fund assets as of the start of the year. Read here about those Top Strategies & Funds and about industry Assets, Launches and Returns.
The debate about the value of hedge funds will continue. But just as it's virtually certain the industry will remain an important slice of the money management universe in 2023, it's instructive to see where we've come since 2003.
Absolute Return - April 2003 - Inaugural Issue by Absolute Return