TheStreet.com – When it comes to hedge fund returns, size matters.
So far this year, hedge funds have returned an average of 2.42%, according to data compiled by Standard & Poor’s. That’s below the S&P 500’s return of 3.76% and, barring a huge December, sets the industry up for its second straight year of disappointing returns.
Numerous explanations are given for the problem, including sluggish markets and too many managers chasing too few strategies. But one overlooked factor is that funds are getting larger.
The 50 largest hedge funds together control $385 billion of assets, according to a list published by Alpha magazine. That’s more than a third of the total asset base for an industry estimated at $1 trillion. When one considers that there are about 8,000 to 9,000 managers, the power concentrated at the biggest shops can’t be underemphasized.
