Trends in Hedge Funds

The hedge funds business remains dynamic - something is always popping. Over the near-term, it seems that investors are becoming more selective about the hedge funds in which they invest. One reason is by default as more than 1,000 hedge funds closed in 2006 and 848 hedge funds closed in 2005. Also, according to a survey conducted by Spectrum Group, the wealthiest Americans are reducing their exposure to hedge funds: Americans with more than $5 million in assets (exclusive of their primary residences) reduced their hedge fund exposure from 17% in 2005 to 14% in 2006 and Americans with more than $25 million in assets (exclusive of their primary residences) reduced their hedge funds exposure from 38% in 2005 to 27% in 2006.

A countervailing trend of the SEC considering increasing the wealth criteria for accredited investors, is that there is somewhat of a trend of Hedge Funds to issues shares. For example, Fortress Investment Group is about to raise $600 million from the public markets. Another study indicates that institutional investors will invest $1 trillion in hedge funds in 2010, up from $360 billion in 2006.

The combination of rising hedge fund dissolutions and the growing appetite of institutional investors to invest in hedge funds elevates the importance of conducting due diligence into hedge funds. A thorough review of hedge fund due diligence is conducted at IncreMental Advantage's Hedge Funds Due Diligence Conference series.