Two Things You Should Know If You Want To Be Real About Hedge Funds

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Hedge funds are known for being high powered, high performing financial firms that employ the smartest people and command the top of top dollar for their services.

So it’s important to keep up with what they’re doing.

This morning, two snippets of information about hedge funds caught our eye. If you think about them at all, you should know these facts about their performance and who’s behind it.

1. 61% of all the money in hedge funds is managed by the 100 largest hedge funds, according to research firm Prequin. So if you’re tracking them you’re really tracking the industry.

2. Hedge fund performance has been abysmal since the financial crisis. This year they’re up an average of 5% compared to the S&P’s 15% gain. Investors have kept putting their money in funds, though. That is, until now, according to Bloomberg:

Hedge Fund Research said in April that funds saw inflows in 14 of the last 15 quarters (PDF)—but now there is evidence that substandard returns may finally be having an effect. According to eVestment, the $2.69 trillion industry has seen net inflows of just $5.8 billion through the first four months of the year, which it calls the slowest rate of growth to start a year on record. (The firm’s database goes back to the third quarter of 2003.) The figure is also the second-worst total on record, after the start of 2009, when investors pulled out $260 billion.

Just consider that a quick public service announcement.

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