The sector is managing $2 trillion, many of them are going public and you can’t swing your bag (I don’t do that) without knocking into a guy who works at one these days, but according to Jenny Anderson, there is no hedge fund bubble. We know what you’re saying—“it feels like a bubble, like 1999 all over again.” But feeling and being are two very different things, and even though your ass may very well be sitting in a moderately comfortable Aeron chair and shouting “tech boom, tech boom , tech boom,” your ass is wrong.
If anything, the spate of hedge funds and private equity firms going public indicates a shift away from a boom. Fewer and fewer shops, says Anderson, are taking major risks for remarkable returns, or “swinging from the chandeliers like George Soros” (something you really must see before you die, the man could give Cirque du Soleil a run for its money, we shit you not). No, the latest funds to go public have their eyes on amassing assets and coming up with stable (good) but unremarkable returns (bad…if you just want things to be like the used to…Brian Hunter knows what I’m talking about).
For the risk-averse, this is preferable:
In a June note entitled “Hedge Fund Management at a Tipping Point?”, Byron R. Wein, chief investment strategist at Pequot Capital Management, wrote: “Hedge funds are today’s asset gatherers. To gather assets, hedge funds have come to believe that they need to reduce volatility, and a number of hedge funds have given up performance to achieve it.”
So we’ve traded the bubble (and the threat of the burst) for safety and predictability, and (save for a few gems: Centaurus, Dillon, Kissing Someone With Mono Partners), no one’s going into work thinking that they could either make a billion dollars or get fired. And that makes us a little sad (though that might actually be the reactive lymphocytosis and atypical T cells).
How This Boom Differs From the Dot-Com Days: Hedge Funds Make Money [NYT]