WEST PALM BEACH, FL (www.hedgeco.net) – Analysts and hedge fund industry participants fear that the growth of new assets for the hedge fund industry may slow down in 2005. Such slowdown may resultfrom high hedge fund fees, which may force the potential investor to think again before making those investments. New hedge fund assets have continued to pile up from one year to another.
According to Tremont Tass report, in 2003, hedge funds took in over $72 billion in new money, however in 2004, new hedge fund assets grew to over $123 billion. Stephen Jupp, Tremont’s director of quantitative research said, “With volatility at historic lows, investors are focusing mainly on returns allocated more to the equity markets and that would explain the tapering off in flows late last year.�
As a growing number of new investment committees are considering hedge fund investments, some worry that the high hedge fund fees may reduce the growth of new hedge assets.
Some experts also doubt if huge pension funds like CalPERS will continue to devote more assets into hedge fund managed portfolios. Ellen Shuman, chief investment officer of the Carnegie Corp said, “For the huge pension funds out there, I think it is silly to invest in hedge funds,” she added, �Pension funds like CalPERS and CalSTERS are too big and they only get low returns.”
There is also the problem that many good hedge fund managers are operating at capacity, meaning such funds will not be taking new management assets any time soon. Michael Schlachter, a managing director at Wilshire, echoed the same concerns as well. Such problem according to him will force some managers to invest in less experienced hedge fund managers, which also charge high fees as well. One manager noted, “When you add it all up, it seems like many times there isn’t much in terms of real profits.� Other experts however still believe that hedge fund assets will continue to be healthy in the years to come, as many more investors understand hedge funds and their methods of doing business.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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