June 13, 2006
Caution is the new byword for hedge funds
Are hedge fund managers reluctant to make risky investments? Agreed hedge funds are supposed to make money the risky way but then they argue that their customers don’t want them to deal in such investments. So, for fear of losing these customers and more importantly, their fees, which can only be called exorbitant, hedge fund firms are now learning to play safe.
As fund managers realized that they were making a killing by raising money from pension funds, endowments, insurance companies and other institutional investors, their taste for the dangerous diminished. And the decisive factor was the 2 percent per annum management fees from large amounts of assets. With all these benefits, it didn’t take long for caution to become the new byword for hedge fund managers. However, any which way you look at it, hedge fund firms seem to be the gainers. Their strategy of caution allows their investors to repose more faith into these firms, which then translates to more business and more money.
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