Hedge Fund Management

Brief Excerpt from Industry Overview Chapter:

The US hedge fund industry includes thousands of companies with combined assets of more than $1 trillion. Many large funds headquartered in the US operate internationally. The largest US-based hedge funds include Bridgewater Associates, JP Morgan Asset Management, Highbridge Capital Management, and Paulson & Co.

The global hedge fund industry is a $2 trillion market by total assets under management, according to Deutsche Bank. The largest non-US funds include Brazilian hedge fund Gavea Investimentos and London-based firms Man Investments, AHL, and GLG Partners. Economic growth in Asia and South America is causing hedge funds in those regions to multiply.

COMPETITIVE LANDSCAPE

Demand for hedge fund services is driven by the growth of investment capital managed by institutional investors. The profitability of individual funds depends on investment expertise. Large funds can more easily participate in big financial transactions. Small funds can compete effectively through specialized investment strategies. The industry is capital-intensive.

Hedge funds are unregulated investment pools that, unlike mutual funds, can engage in a wide variety of investment activities. Hedge funds are typically organized, marketed, and operated by an individual or institution that also serves as the fund's investment adviser.

PRODUCTS, OPERATIONS & TECHNOLOGY

Hedge funds operate much like mutual funds, but are also able to trade financial derivatives and to take "short" positions, in which investors sell borrowed shares of stock in anticipation of a decline in value, and buy them back at a profit. In contrast, mutual funds can...