Our Top Facts on Hedge Funds
You’ve always wanted to know what hedge funds are all about? You came to the right place.
Since George Soros made his famous bets against the British pound in 1992 — pocketing $1 billion in the process and causing Britain to bow out of Europe’s monetary union — hedge funds, like Mr. Soros’s Quantum Fund, have been blamed for all sorts of evil-doing in the world economy. But with the collapse of Long-Term Capital Management, Julian Robertson’s Tiger Funds and departure of key managers at Soros’s funds, hedge funds appear to have lost some of their potency. Our facts will explain.
Between 1990 and 1997, the number of hedge funds worldwide more than doubled to about 4,500 — and their total assets increased six-fold to $300 billion.
By early 2000, U.S. hedge funds had as much as $1 trillion in assets. Still, they controlled only 4% of the $25 trillion in global pension funds, mutual fund and insurance company assets.
In 1999, the United States contributed $18 billion in capital to the IMF. That was about the same amount as George Soros’s short position against the British pound in 1992.
Between 1980 and 1998, Tiger Funds, Julian Robertson’s flagship hedge fund, grew from $8.8 million in assets to $21 billion in assets — an increase of 259,000%.
In 1998, the total of assets held by most U.S. hedge funds was about 25 to 35 times greater than their equity bases. That was, however, similar to the leverage ratio some of the top investment bank, including Morgan Stanley Dean Witter, Merrill Lynch and Donaldson, Lufkin & Jenrette.
(Salomon Smith Barney)
As of 1998, about 80% of hedge fund assets were provided by pension funds, endowments, foundations and other institutional investors.
In June 1999, Long-Term Capital Management — the failed $4.7 billion hedge fund — announced to shareholders that it would soon cash out the stakes of its original investors in 1994. That redemption, combined with cash distributed back in 1997, produced a total average annual return of under 19%. Over the same period, the S&P 500 index returned an average of almost 27%.
(New York Tim)