Hedge Funds: An Industry in Decline

The listed hedge fund industry is in decline, but certain funds are still doing remarkably well

Jackie Beard, FCSI 20 August, 2012 | 9:48AM
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One of the benefits of the investment trust structure is that the manager doesn’t have to worry about inflows and outflows as funds come in and out of fashion. Indeed, it was this very fact that was behind the launch of a raft of hedge funds, and funds of hedge funds, as listed investment companies in the early 2000s. But the financial crisis in 2008 turned this on its head, which leads us to ask, is a listed company really the right structure for a hedge fund, and indeed, the average investor?

At its peak in mid-2008, the listed hedge fund sector comprised more than £8 billion in assets, according to the Morningstar Investment Trust Hedge Fund Index. Today this is nearer £5 billion and the number of funds (at a share class level) has dropped by more than 40%. This year alone, we’ve seen a number of funds breach their discount control targets, triggering a continuation vote.

There are now just 23 funds in the sector, of which four are in the process of realising their assets and three more are asking shareholders to vote on the continuation of the company. So what’s happened to push them so out of favour?

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BH Macro GBP Ord3,600.00 GBX-0.83Rating
Highbridge Tactical Credit Fund Ord270.00 GBX0.75

About Author

Jackie Beard, FCSI

Jackie Beard, FCSI  is Director of Manager Research Services, Morningstar EMEA

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