July 17, 2006
Are hedge funds getting to be boring and predictable?
Common belief is that hedge funds are supposed to make money the risky way so why is it that hedge fund managers are now fighting shy of taking risks? Their argument is 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.
This sudden change in what is essentially a risk-taking business came about slowly. The sector's profile witnessed a change after institutions poured money in and drove worldwide hedge fund assets to more than $1,000bn. This large amount of money has weighed heavily on hedge fund performance and has led to ‘overcrowding’ in many strategies. As they reach critical mass, these firms begin to slowdown their aggressive activity and try to appease their major clients.
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