A report issued by global investment bank JP Morgan has warned that tough times may lie ahead for the hedge fund industry as an increasing number of fund managers attempt to chase diminishing trading and profit opportunities.
With recent estimates putting the size of assets under management in single manager funds at $1 trillion, and with the number of fund companies having escalated dramatically, the market inefficiencies being chased by many funds have dissipated, according to the review.
“Market opportunities have been eroded most in the areas where we have seen the most hedge funds activity: equities and interest rate markets,” stated the report.
Accordingly, the bank suggests that opportunities remain in markets where there are fewer hedge funds operating, such as credit markets, or where the market place is too large for hedge funds to have an influence, notably foreign exchange.
However, despite some recently unfavourable performance figures and low volatility levels in world markets, the report concluded that “it is too early to write off hedge funds.”
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