This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Hedge Funds Go For a Makeover

Hedge funds investors are overwhelmingly happy with their investments in the lightly regulated investment pools, despite indications that average fund results will be underwhelming in June for the third consecutive month.

Conservative institutional investors such as pension funds continue to pour money into hedge funds, suggesting that the much scrutinized $800 billion industry is successfully recasting itself as a haven from bear markets, rather than an arena for dramatic gains from speculative bets.

To get larger sums of money to manage, Wall Street's cowboys have traded in their pickups for minivans, and the image makeover seems to have worked. In 2003 alone, hedge fund assets under management grew from $592 million to $795 billion, a 34% increase, according to the Hennessee Group, a New York investment advisor that creates custom portfolios of hedge funds.

At the same time, Securities and Exchange Commission Chairman William Donaldson has cited pension fund investment as one reason the agency should increase its oversight of the approximately 6,800 hedge funds now operating in the U.S. The commission is scheduled to consider the oversight measure at its July 14 meeting.

The Hennessee survey also reported that 88% of hedge fund investors said their investments "met or exceeded expectations" and that 62% of the endowments that invest in them will be increasing their capital. Since hedge funds generally require individual investors to invest a minimum of $1 million -- for most institutions, it's $5 million -- that's serious money.

Leon Metzger, vice chairman of Paloma Partners, a Greenwich, Conn., hedge fund, said the arrival of pension fund represents a logical progression.

"In the '90s, the stock market was doing very well, and investments there generally did better than the payout rates of pension plans," he said. "Once the market tanked, pension plan trustees had to be concerned -- if you were paying out 8%, you had to be earning 8%. Therefore, significantly more pension plans started paying attention to these alternative investments."

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs