Month: November 2014

Largest Hedge Funds

mark tuminello top fiveAlthough all hedge funds put together estimate about 3 trillion dollars in assets, a large portion of that money comes from the top five hedge funds.  The biggest hedge funds manage around 1.6 trillion dollars, more than half of the number of assets that every hedge fund put together makes.  The following is a list of the largest hedge funds at the moment:

Number one is JPMorgan Chase through both Highbridge Capital Management and JPMorgan Chase Asset Management.  Although this hedge fund has lost around 9 billion dollars previous years due to funding, the company still makes over 45 billion dollars when it comes to assets.  JPMorgan Chase invests in almost anything – from real estate to arbitrage products.  One of their key mechanisms for gaining such an abundant income is hiring employees who each have different means of investment philosophies and managing styles.

The next two hedge funds with the highest incomes are Farallon Capital Management and Bridgewater Associates.  Though both of these hedge funds are based out of separate coastlines, each of these firms acquire roughly 36 billion dollars in assets.  San Francisco’s Farallon is a top choice for extremely wealthy individuals.  This hedge fund hosts various events which aim to capitalize on investment opportunities, particularly within the housing market.  Connecticut’s Bridgewater Association is exceptionally talented with thriving in emerging markets, currency, commodities, bonds, and equity investments.

Number three on this list of the largest hedge funds is New York’s Renaissance Technologies, who earns 35 billion dollars under their strategic management.  The Medallion Fund is Renaissance Technologies most well-known investment; it averages around 35% in annual returns, charges investors a 5% management fee, and has a 44% performance fee.  This hedge fund uses a global macro strategy when it comes to employment-making decisions, hiring only the top mathematically and scientifically driven individuals, as opposed to more financially consumed ones.

Also out of New York, Och-Ziff Capital Management is the fourth largest hedge fund, gaining around 33 billion dollars in assets.  This hedge fund invests most predominantly in real estate, private equity, and equity restructuring – mostly in foreign-based markets.  Although Och-Ziff Capital Management has experienced a rough time in the 2008 market, they are still rated in the top ranking hedge funds.

Lastly, D.E. Shaw is ranked number five on this list, earning around 32 billion dollars.  This other New York based hedge fund is an expert at buying out companies in trouble while simultaneously developing and financing newer ones.  D.E. Shaw takes pride in their extremely talented math-oriented staff, who use their computer skills to find most all of their market opportunities.

These top six hedge funds prove that online investment locating and hiring intelligent, fast paced employees are key to succeeding in an incredibly competitive market.

from Mark Tuminello – latest post by Mark Tuminello

Evolution of Hedge Funds : An Overview

mark tuminello hedge fund evolutionHedge funds, regardless of the name, are largely defined by their structural nature of incorporating various investment strategies and risk-management approaches, instead of their “hedging” characteristics. Hedge funds are essentially private partnerships providing the highest flexibility in establishing a portfolio. They allow provisions to make concentrated investments, use derivatives or leverage, allow investments in various markets and can be both long and short sides of the market.

In the past decade, the hedge fund industry has grown astoundingly from about 300 funds in 1990 to more than 10,000 in today’s times. It is estimated that these funds manage over $1.4 trillion in assets, onshore and offshore has is now increasingly monitored by the markets and the press. Alfred W Jones, in 1949, was the founder of the idea of hedge funds. He did so as he ‘hedged’ the market risk by short-selling and through effective use of leverage and this created led a steady trend of hedge funds outperforming mutual funds of that time.

It wasn’t until the 1960s, however, that hedge funds truly started to catch people’s eye, especially the eyes Pioneers like Warren Buffett and George Soros, who took a keen interest in Jones’ unique strategy and this led to the creation of over 130 hedge funds in the subsequent years. The attractive tendency of hedge funds, like real estate or private equity, to provide returns unlike those of traditional investments, increasingly attracted large number of institutional, and even individual investors.

In the 60s and 70s, hedge fund managers hedged their portfolios in the true sense of the word to make money on both long and short positions and in a few years, managed to make impressive profits for themselves, while delivering huge returns. Unfortunately, eventually, there were many investment professionals who saw hedge fund management as a way to make quick easy money, by bypassing the limiting infrastructure of the mutual fund industry.
Hedge fund managers today do not quite ‘hedge’ funds as much and have come a long way from Alfred Jones’ simple leverage and short-selling strategy. Many hedge funds, nowadays, take a more speculative approach and venture to achieve absolute returns.

The core investment strategy of modern hedge fund is not hedging or market risk reduction, but rather to use the right kind of leverage to optimize market’s returns in a type of inflexible bet on market swings and many such funds have earned cash-like returns with outrageous fees. These questionable strategies, says Lee Levy in his article about Hedge fund worthiness, have earned a negative reputation for the hedge fund industry in today’s market but in the end the process is all about some managers developing new ways to critically analyze the market, while the rest stay with traditional reliable methods.

The 2008 catastrophe of markets crashes all over the world led to some of the most disastrous times in the hedge fund industry. Some of the brightest and most successful managers has losses of 30 percent or more and there was a fall in the number of assets under management, since many investors switched to cash investments and even treasury bills. However, the beauty of the diverse strategies used used by hedge fund managers meant that some had implemented strategies that actually tended to have greater returns in a more erratic market and they made money for the investors, inspite of the ill-fated financial crisis. In early 2009, the industry recuperated impressively and since then has risen steadily in popularity among many investors.

Only time will tell how this regularly misunderstood, occasionally mistrusted, often rightly so, continually evolving industry will fare in the future years but it’s propensity to adjust to shifting markets points towards a rather bright one.

from Mark Tuminello – latest post by Mark Tuminello