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The Hedge Fund Explosion: Is The Bang Worth The Buck?, Arindam Bandopadhyaya, James L. Grant

College of Management Working Papers and Reports

Any casual following of the financial news would reveal that hedge funds have experienced phenomenal growth, especially over the last fifteen years. In terms of numbers, there were an estimated 8000 hedge funds in 2005, up from only 500 in 1990. During this fifteen-year period assets under management have grown from an estimated $50 billion to $1.5 trillion. Moreover, the hedgefund industry has spawned a “fund of funds” business, which has slowly become the preferred way of investing in hedge funds, especially for institutional investors. Today, the number of these combination funds is estimated at about 4000.

Until recently, hedge …