Growing enthusiasm for hedge funds, paired with a profitable fee structure and positive returns, has given the hedge fund industry the capital to extend its influence. As the snowball effect of assets and profits turns into an avalanche, competition for hedge funds’ business continues to grow fiercer.
According to a TABB Group study of 61 U.S.-based hedge funds—representing approximately 15% of the total U.S.-based hedge fund assets—in the first quarter, prime brokers “will reel in more than $11 billion revenues from hedge funds in 2008, a 15% increase over 2006.”
“TABB Group estimates industry revenues generated from financing, stock loan, custody and other prime services will surpass other institutional business lines by 2010, in particular the cash equity business, which is hovering around $12 billion a year,” wrote co-authors Matthew Simon and Monica Schulz.
According to TABB, hedge funds are planning a continued expansion of their businesses, including opening up offices around the globe: as many as 800 depending on market conditions, launching new funds and trading new markets.
“Although there are thousands of poseurs that dare to call themselves a hedge fund with nothing more than an Internet connection and a partnership agreement, the true industry players have seen significant growth over the last year, with the average fund approaching $4.5 billion AUM, rising from $1.85 billion in 2006,” Adam Sussman, TABB Group’s director of research, added.