Post by Catdaddy on Nov 23, 2007 14:26:02 GMT -5
Breaking News from MoneyNews.com
Hedge Funds Still Raking in Cash
Hedge funds, those huge pools of opaque, exotic investments, are off the canvas and back on their feet again stronger than ever.
By the end of the third quarter they took in a record-high inflow of $164 billion in new investor money, according to Chicago’s Hedge Fund Research (HFR).
Although some stellar hedge fund firms were knocked out or badly hurt by big losses — including, reportedly, Goldman’s Global Alpha fund, down 60 percent according to sources — savvy portfolio managers have now revived the previously staggering sector.
Worldwide, hedge funds specializing in equities were up more than 13 percent through October 31, the biggest gain in four years, says HFR.
Equally impressive, hedge funds in general rose 10.5 percent and are heading toward their best year since 2003. At the same time, the S&P 500 is up a feeble 4 percent, including dividends, a percentage point or more less than some no-risk treasuries and CDs.
"The whole model has changed," Jiles Conway-Gordon, a joint managing partner for Cogo Wolf Asset Management, in San Francisco, which manages a fund of hedge funds, told the Medill News Service.
"It's much tougher. You now actually have to be good. There is a very welcome Darwinian process," Conway-Gordon said.
As positive hedge fund numbers increased, investors pulled funds from poorly-performing or slumping instruments and reallocated them, thus accounting for the unprecedented incoming cash flow.
One of the most spectacular gains in a single portfolio was the 550 percent increase in debt and credit-oriented returns posted by Paulson & Company’s $24 billion fund because it was on the right side of the housing slump.
Behind the hedge fund turnaround are industry visionaries who foresaw the impending subprime mortgage debacle and the potential defaults in the high-risk debt market and dumped holdings in these areas.
Judicious buying at the same time in certain equities and markets and sales in others, also added to hedge fund profits.
For example, long positions in such spiking commodities as oil, gold, and foreign currencies, and in selected emerging markets boosted bottom lines.
Among other big outfits which posted major gains are:
Lone Pine Capital LLC, up 35 percent, spurred by winning stock picks by Stephen Mandel, Jr. Mandel bought Deutsche Borse and Google, up respectively 70 percent and 36 percent this year;
Third Point Advisors, with a 15 percent gain;
D.E. Shaw & Company's $11 billion Oculus fund with a 23 percent gain; and
Art Samberg's Pequot Capital Management with a 20 percent gain.
Not all hedge funds made money, however.
Sears Holdings were down. In the wake of heavy losses, Bears Stearns closed two funds, and Sowood Capital dropped more than $1.5 billion and called it quits.
With their additional money and the power that comes with it, winning funds may now be able to exert global trading influence as they buy and sell in massive lots, thus possibly driving markets up or down.
But cautious analysts are now asking if the biggest hedge funds can continue to outperform the market and maintain their sky-high returns.
What's for certain is that competition from new and less cash-rich funds will diminish over time as these firms fail to pull in significant investor money.
Already the handwriting is on the wall.
Worldwide, only 600 hedge funds were initiated in the first two quarters of 2007, a lackluster growth rate last seen in 2003, says HFR.
These newer firms must now struggle against a leveling off and possible fall-back in oil and oil futures, and a continuing decline in the U.S. dollar, limiting reasonably certain opportunities
Hedge Funds Still Raking in Cash
Hedge funds, those huge pools of opaque, exotic investments, are off the canvas and back on their feet again stronger than ever.
By the end of the third quarter they took in a record-high inflow of $164 billion in new investor money, according to Chicago’s Hedge Fund Research (HFR).
Although some stellar hedge fund firms were knocked out or badly hurt by big losses — including, reportedly, Goldman’s Global Alpha fund, down 60 percent according to sources — savvy portfolio managers have now revived the previously staggering sector.
Worldwide, hedge funds specializing in equities were up more than 13 percent through October 31, the biggest gain in four years, says HFR.
Equally impressive, hedge funds in general rose 10.5 percent and are heading toward their best year since 2003. At the same time, the S&P 500 is up a feeble 4 percent, including dividends, a percentage point or more less than some no-risk treasuries and CDs.
"The whole model has changed," Jiles Conway-Gordon, a joint managing partner for Cogo Wolf Asset Management, in San Francisco, which manages a fund of hedge funds, told the Medill News Service.
"It's much tougher. You now actually have to be good. There is a very welcome Darwinian process," Conway-Gordon said.
As positive hedge fund numbers increased, investors pulled funds from poorly-performing or slumping instruments and reallocated them, thus accounting for the unprecedented incoming cash flow.
One of the most spectacular gains in a single portfolio was the 550 percent increase in debt and credit-oriented returns posted by Paulson & Company’s $24 billion fund because it was on the right side of the housing slump.
Behind the hedge fund turnaround are industry visionaries who foresaw the impending subprime mortgage debacle and the potential defaults in the high-risk debt market and dumped holdings in these areas.
Judicious buying at the same time in certain equities and markets and sales in others, also added to hedge fund profits.
For example, long positions in such spiking commodities as oil, gold, and foreign currencies, and in selected emerging markets boosted bottom lines.
Among other big outfits which posted major gains are:
Lone Pine Capital LLC, up 35 percent, spurred by winning stock picks by Stephen Mandel, Jr. Mandel bought Deutsche Borse and Google, up respectively 70 percent and 36 percent this year;
Third Point Advisors, with a 15 percent gain;
D.E. Shaw & Company's $11 billion Oculus fund with a 23 percent gain; and
Art Samberg's Pequot Capital Management with a 20 percent gain.
Not all hedge funds made money, however.
Sears Holdings were down. In the wake of heavy losses, Bears Stearns closed two funds, and Sowood Capital dropped more than $1.5 billion and called it quits.
With their additional money and the power that comes with it, winning funds may now be able to exert global trading influence as they buy and sell in massive lots, thus possibly driving markets up or down.
But cautious analysts are now asking if the biggest hedge funds can continue to outperform the market and maintain their sky-high returns.
What's for certain is that competition from new and less cash-rich funds will diminish over time as these firms fail to pull in significant investor money.
Already the handwriting is on the wall.
Worldwide, only 600 hedge funds were initiated in the first two quarters of 2007, a lackluster growth rate last seen in 2003, says HFR.
These newer firms must now struggle against a leveling off and possible fall-back in oil and oil futures, and a continuing decline in the U.S. dollar, limiting reasonably certain opportunities
