FYI: A decade ago, the collapse of Lehman Brothers marked the psychological low of the 2008 Financial Crisis. Equity prices bottomed a few months later, in March 2009. Hedge funds had nimbly managed their way through the 2000-02 dotcom collapse, which led to substantial inflows over the next six years. By 2008 AUM had quadrupled, as less discerning investors piled in. In my 2012 book The Hedge Fund Mirage; The illusion of Big Money and Why It’s Too Good to be True, I showed that although early hedge fund investors had done very well, they weren’t that numerous.
The strong returns from the 1990s through 2002 had come with a much smaller industry. Consequently, hedge funds were far too big when the 2008 collapse came, and losses wiped out all the prior years’ profits. It meant that in the history of hedge funds, aggregate investor gains were offset by other investors’ losses. Hedge fund managers had profited; the clients had not. If all the money that’s ever been invested in hedge funds had been put in treasury bills instead, the results would have been twice as good. The Hedge Fund Mirage Turns Five showed that the book’s prediction of continued disappointment was right.
Regards,
Ted
https://sl-advisors.com/hedge-funds-high-fees-low-returns-2
