During the past decade, hedge fund managers have emerged as masters of a secretive, $1.08 trillion universe. They rode the ’90s bull market, shorted stocks as the Nasdaq collapsed and made – and sometimes lost – vast fortunes.
Now, the days of easy money are over. After more than doubling in size since 2000, the hedge fund industry entered the final months of 2005 with almost no hope of reliving its past glories, at least for now.
Few investment strategies employed by hedge funds, such as fixed-income arbitrage, convertible bond bets and rapid-fire stock trades, made much money early in the year. By Sept. 30, the average fund worldwide was up 7.4 percent in 2005, according to Hedge Fund Research Inc., a Chicago-based firm that tracks the industry. In October, that return withered to 5.99 percent – a fraction of the gains posted in the golden years like 1999, when the average manager delivered 31.3 percent.
