Hedge Fund

Below is information about the hedge fund industry. The Hedge Fund industry is estimated to be a over $500 billion dollars industry and hedge funds industry is growing at about 20% per year with over 7000 active hedge funds.

What does hedge fund industry comprise of?

Within the hedge fund industry, hedge funds include a variety of investment strategies, some of which use leverage and derivatives while others are more conservative and employ little or no leverage. Many hedge fund strategies seek to reduce market risk specifically by shorting equities or through the use of derivatives.
Most hedge funds are highly specialized, relying on the specific expertise of the manager or management team.

Hedge Fund Performance

Performance of many hedge fund strategies, particularly relative value strategies, is not dependent on the direction of the bond or equity markets unlike conventional equity or mutual funds (unit trusts), which are generally 100% exposed to market risk. This makes investing in hedge funds a good way to diversify your investment portfolios.

Many hedge fund strategies, particularly arbitrage strategies, are limited as to how much capital they can successfully employ before returns diminish. As a result, many successful hedge fund managers limit the amount of capital they will accept.

Hedge Fund managers and their investment returns

Hedge fund managers are generally highly professional, disciplined and diligent. Their returns over a sustained period of time have outperformed standard equity and bond indexes with less volatility and less risk of loss than equities.

Beyond the averages, there are some truly outstanding performers.

An increasing number of endowments and pension funds allocate assets to hedge funds.

The chart below shows how hedge fund industry grew in the US.

Source: Van Hedge Fund Advisors, KPMGIRR Capital Management Corp.

Left hand scale shows hedge funds industry assets under hedge fund management in billon dollars USA. Right hand scale shows number of hedge funds in the US. Bar chart shows assets under hedge fund management while line chart shows number of hedge funds.