Today, the Alternative industry and special the Hedge Fund industry has come a long way from what it was in the 1950s when it had its first debut. It wouldn’t be incorrect to say that the turmoil it went through in its history has made this industry one of the most resilient in the market. In 2011, the 241 Hedge Funds in the United States collectively owned Assets under Management of around $1.34 Trillion, including offshore and onshore funds. In late 2012, approximately 1,500 private fund advisers were registered with the SEC.
The initial number of 300 Hedge Funds in the 1990s soared to 10,000 in 2012, with a record high of $2.3trillion in funds. The Hedge Fund Industry has become quite varied today. No longer does it only deal with investments that are significantly hedged. Instead, the paradigm of Hedge Funds has changed drastically from what Jones had conceived.
The term Hedge Funds has come to include various kinds of pooled investments that are managed and looked after by management companies. These companies are usually structured as Limited Liability Entities that invite investors to pool in. Investors who contribute to Hedge Funds have to be accredited by the SEC, and only when they provide proof of a net worth of $1 million and income of $200,000 million per year, are they granted sound status.
SEC Regulations regarding Hedge Funds
While Hedge Funds also operate on the regular premise of buy and sell, their working is more complicated than direct investments. The Hedge Fund Industry is marked by a number of restrictions and regulations. The SEC changed many investment clauses to regulate these funds, including one that required Hedge Fund managers to register as Investment Advisors under the Investment Advisor’s Act 1940.
Moreover, requirements like upkeep of performance records became a norm in the Hedge Fund Industry, increasing its regulation far above what it was in the 1990s. However, despite the trouble investors and managers have to go through to fulfill these requirements, the Hedge Fund Industry has flourished, if not more, then as much as other financial instruments have in recent years.
All in all, this industry has seen many highs and lows, attracted media attention and some tremendous applause for resurfacing on the investment horizon various times. Today, it is definitely one of the most famous investment sectors for investors who often get too caught up in its working. While this may be a good sign to maximize returns, a word of caution is often given by experts who believe that history will repeat itself again for the Hedge Fund Industry in particular.
Therefore, it is best to be careful and deal a hand after a lot of thought and consideration. Due diligence, need assessment and taking time out to learn the basics of this industry are some important prerequisites to make sure investors do not put their hard-earned money at unreasonably high risk.
Industry Trends for 2014
If there is anything that a layman can decipher from the history of the Hedge Fund Industry, it is that this segment of the financial market is highly dynamic in nature. While it is starkly different from direct investments and many other types of financial tools, it fluctuates as much as any vehicle in this market.
Needless to say, with such dynamic changes comes the possibility of higher return- and equally higher and dangerous losses. It is for this reason that the Hedge Fund Industry is considered one of the most rewarding yet challenging ones. With sporadic and regular changes in the market, it is imperative that investors take a keen look at the positives and negatives of the playing field first.
The best assessment in this case is studying the trends that will be prevalent in the Hedge Funds Market. These trends give a snapshot of what is likely to happen in the current year. More often than not, trends are either predictions made by experts who have been observing this sector of the financial market for a while, or they are extrapolations of past and existing happenings.
Why are industry trends so important? There are many who feel that the Hedge Fund industry, or any financial market for that matter, has a new beginning each day and so studying industry trends does not guarantee any buffer against loss. However, another school of thought asserts that because every factor or determinant in a market is interdependent on the other, industry trends give a good idea of what to prepare for ahead of time.
They are the ideal tool that Hedge Fund investors and managers need to prepare themselves and their companies, in order to take advantage of certain opportunities and stay away from those that are likely to cause harm. Consequently, these trends make room for investors to evolve with the market, adapt to changes and leave behind what is no longer needed. After all, the Hedge Fund Industry is one of the best examples of survival of the fittest!
Dinis Guarda is an author, academic, influencer, serial entrepreneur and leader in 4IR, AI, Fintech, digital transformation and Blockchain. With over two decades of experience in international business, C level positions and digital transformation, Dinis has worked with new tech, cryptocurrencies, drive ICOs, regulation, compliance, legal international processes, and has created a bank, and been involved in the inception of some of the top 100 digital currencies.
Dinis has created various companies such as Ztudium tech platform a digital and blockchain startup that created the software Blockimpact (sold to Glance Technologies Inc) and founder and publisher of intelligenthq.com, hedgethink.com, fashionabc.org and tradersdna.com. Dinis is also the co-founder of techabc and citiesabc, a digital transformation platform to empower, guide and index cities through 4IR based technologies like blockchain, AI, IoT, etc.
He has been working with the likes of UN / UNITAR, UNESCO, European Space Agency, Davos WEF, Philips, Saxo Bank, Mastercard, Barclays and governments all over the world.
He has been a guest lecturer at Copenhagen Business School, Group INSEEC/Monaco University, where he coordinates executive Masters and MBAs.
As an author, Dinis Guarda published the book 4IR: AI, Blockchain, FinTech, IoT, Reinventing a Nation in 2019. His upcoming book, titled 4IR Magna Carta Cities ABC: A tech AI blockchain 4IR Smart Cities Data Research Charter of Liberties for our humanity is due to be published in 2020.
He is ranked as one of the most influential people in Blockchain in the world by Right Relevance as well as being listed in Cointelegraph’s Top People In Blockchain and Rise Global’s The Artificial Intelligence Power 100. He was also listed as one of the 100 B2B Thought Leaders and Influencers to Follow in 2020 by Thinkers360.