Dear Alpha Mail Subscriber:
For years, critics warned of hedge fund "overcrowding". They warned of too many assets chasing too few alpha opportunities. The $3 trillion question on everyone's mind was "What is the capacity of the hedge fund industry?"
Well good news! That's apparently no longer a concern. With $150 billion of redemptions last year and a further $150 billion or more forecast for this year, weaker hedge funds are dying off, leaving rich pastures to those who survive the culling.
What is left may resemble the industry of 2005 ($1 trillion AUM), but with way more alpha opportunities, mispricings and market anomalies. Ironically, $1 trillion dollar mark looked pretty good last time around, as this 2005 article in Hedgeweek suggests. Still, as you can see by this month's list of most popular AAA posts "indiscriminate redemptions", "redemption d-days", and the re-emergent threat from traditional investments are now on everyone's minds. |
| Last Month's Most Popular Posts |
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- Hedge funds put on hold while consultants take calls from traditional investments: Traditional investments have been on hold for a few years and are now hitting "#" to speak with a representative.
- If hedge fund "overcrowding" was bad for returns, is recent "undercrowding" going to be good? : Like wildlife cullings, will recent hedge fund cullings allow survivors to prosper?
- Calculating alpha as the market crashes: Common metrics work in common times. But what happens when (things) hit the fan?
- Financial crisis to slow convergence of hedge funds and private equity, but not for long, says academic: Don't return the gifts yet. Scholar says marriage between hedge funds and private equity is still on.
- More evidence of indiscriminate hedge fund redemptions: The rule of the hedge fund game in Q4 seemed to be "If you got 'em, sell 'em".
- Battle of the Quants III blow-by-blow: In a first for AllAboutAlpha.com, we "live blogged" from this event every hour throughout the day.
- Alternative Investments - Live at the Met(ropolitan Club): Not quite the Met. But the CAIA Association and CFA Society hit all the right notes with this joint conference on alternative investments.
- New spin on an old metric: Researchers dust off Sharpe Ratio and give it a new graphical spin.
- More mystical dates: The media continues its obsession with "redemption dates". But we still haven't seen convincing evidence these mystical dates exist.
- Alternative Investments in India - Regulatory easing, growth in private equity, and new real estate opportunities: Alternative investments remain somewhat marginalized in the sub-continent, leading some to suggest huge potential going forward.
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The past 12 months have seen some of the best relative performance for hedge funds in their history - beating the MSCI World by over 20% in 2008 and by around 15% in the first two months of this year. History will tell how much of this was truly alpha. But many say that hedge funds produced a lot more alpha than traditional long-only investments over the past year.
Commentators are quick to dismiss negative absolute performance as a failure to fulfill "the promise of hedge funds". But beta-centric strategies, on the other hand, were a total sinkhole over the past year. As a result, surveys show that despite being rightly disappointed with negative hedge fund performance, many investors say they will continue to invest in alpha-centric strategies.
Happy Alpha Hunting,
Christopher Holt, Editor
AllAboutAlpha.com
editor@allaboutalpha.com
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