2014 another successful year for Hedge fund managers
The Hedge fund managers or “smart money”, as they often like to be called, have closed one of the best years in terms of performance. Effectively these funds are becoming bigger and bigger and maintaining a respectable performance is becoming harder and harder. In year 2014 is estimated that these funds manage more than $3 trillion. The impact of technology is becoming very decisive for these hedge fund managers to keep performance high. The high frequency trading is also becoming integral part of many hedge funds. These people are really very smart but the problem is that often they fight against each other and being smart is not enough to make double digit returns in today’s markets. The result of this bold battle is that performances are aligning between the different funds.
The common funds managers often follow the markets they target and they don’t worry very much if the market indexes doesn’t perform very well. Instead, Hedge fund managers are on the front line of finance. The basic idea is that these hedge funds must always outperform the market indexes and always make a positive return on assets.
What hedge fund managers do to have positive returns?
- They exploit the malfunctions of the markets and benefit from them,
- They do arbitrage between different products and different markets,
- They try to hedge always the positions,
- They use algorithmic programs to catch the momentum of the markets,
- They use high frequency trading to boost the performance,
- They try to understand where the value is, before the other managers,
- They open positions in different kind of markets that has a negative correlation between each-other, as a way of diversification and hedge,
- They do carry trade on different currencies,
These are only some of the most important actions that hedge fund managers do, to have positive returns independently of the trend of the different markets. That’s obviously not something can every investor do. This is the reason and also a justification of why these fund managers make so much money for their customers and for themselves. Ultimately, the public image of these hedge fund managers is not performing the same as their funds. Highest paid hedge fund managers made $11.6 billion in 2014. This is too much also for the American culture which has for long time accepted the concept that everybody can make as much money as the market permits. President Barack Obama and the democratic candidate for the white house Mrs. Hillary Clinton have been critics on the statements they released lastly about the argument. Is this a bad sign for hedge fund managers? This is an on-going story and an on-going concern for American people that are worried about the high concentration of the wealth on a few people. Official statistics show that the wealth distribution in the US is concentrating further. May be is time for a tax revolution.