How about those hedge funds

By Dian Vujovich

It’s no secret that hedge funds have an appeal. In addition to being an alternative investment fit for the high and mighty and wealthy too, you’ll also find these expensive-to-invest-in  funds in the portfolios of many institutions.  As for their returns, so far this year bond-focused hedge funds have outperformed equity-only ones.

According to eVestmentHFN, a hedge fund tracking service, credit-focused hedge fund portfolios had gained 4.11 percent by the end of May this year  while equity-focused ones were only up  2.4 percent.

Looking ahead, recent  stories about these  alternative investments indicate their assets  are expected to grow by $5 trillion over the next five years.  That’s  huge  particularly since another source, Hedge Fund Research (HFR), reports  total hedge fund industry assets currently around $2.13 trillion.

What’s also substantial are the numbers of new hedge funds around and the number of those no longer in existence.

HFR data shows that during the first quarter of this year,  232 hedge funds were liquidated—the highest quarterly liquidation in a couple of years. And, 304 new funds came to market.

Regarding  Fund of Hedge Funds,  a type of hedge fund that has  fallen way  out of favor with investors, 34 were introduced during the first quarter of this year while nearly twice as many, 64, were liquidated.

If you’re wondering where investment dollars into the hedge fund world are coming from, according to a graph in a Reuters piece titled “The future of hedge funds” by Felix Salmon published on June 12, in 2007, 43 percent of assets under management came from institution investors such as endowments, foundations, pension funds, insurance funds, etc. The bigger pool of money, like the other 57 percent, came from high net worth individuals and family offices.

In 2011, however, the tables had turned and most assets, 60 percent, came from the institutional investing world—a trend  the pros say is  likely to continue.