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Hedge Fund Management An Industry in Transition

September 24, 2009

By Mitchell Nichter and Sasha Burstein

Over the past two decades, the hedge fund industry has experienced tremendous growth and success. The industry has grown rapidly both in the number of funds and in assets under management. In a recent speech, a Commissioner from the Securities and Exchange Commission (SE C) noted that the industry managed an estimated $38 billion in 1990, $625 billion in 2002, and $1.9 trillion at the end of 2007, decreasing to $1.3 trillion at the end of 2008.1 According to the data compiled by Hedge Fund Research Inc., hedge funds had $1.43 trillion in assets at the end of the second quarter of 2009.2 In terms of market impact, hedge funds reportedly account for 1822 percent of all trading on the New York Stock Exchange.

Precipitated by a number of recent phenomena and events, hedge fund management is undergoing a fundamental transformation. The successful hedge fund managers of tomorrow will operate in a very different environment than in the past, and will have adapted their business models to compete successfully in the new environment.