Hedge Funds Grow, Returns Fall

Over the past decade, investors have continued to pour new assets into hedge funds. Total hedge fund assets under management are now greater than $2.6 trillion, and the number of hedge funds continues to grow (current estimates put them in excess of 10,000, more than twice the number there were in 1990).

Consider also that in 1993, the industry was managing less than $40 billion. That means the compound rate of growth of assets under management was over 23% per year. Given the tremendous increase in assets, you’d think that the industry had delivered great returns. Unfortunately, you would be wrong. Persistently over time, the aggregate performance of the industry has deteriorated.

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