WEST PALM BEACH, FL (HEDGECO.NET) – As the year 2004 draws to a close many hedge fund managers are facing increasing pressure to make money for investors in a year marked by lackluster returns.However, the level of hedge fund borrowing remains relatively neutral according to Michael Purvis, head of risk management at Blackstone Alternative Asset Management. Purvis made such remarks at theICBI financial conference. He said, “There is excess leverage in some places…and there has been a trend to leverage fund of funds; but I don’t see a material increase in leverage.”
This year has proved very challenging for many hedge fund managers. Many market watchers blame a trend less equity markets, low trading volume , and volatility for the lackluster year. Hedge fund managers are struggling to post gains as the year slowly draws to an end. Speaking about pressure on hedge fund managers, Purvis said, �Clearly as a hedge fund manager there are tremendous pressures to make money. If you face (return) requirements of 15 to 20 percent you have got to take on the risk to do it.”
Some hedge fund experts are now concerned about the dangers associated with the highly indebted fund of funds. According to this view point, fund of funds have grown to about $100 billion in total assets under management. Jan Frogg head of the hedge fund division of Swiss wealth manager Union Bancaire Privee (UBP), previously warned that the highly leveraged fund of funds mangers are risking investment outflows which may adversely impact their credit ratings.
No one expects any hedge fund bubble in the making; however some type of consolidation period may be inevitable for the hedge fund industry to absorb all the new growth occurring within the sector.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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