CHAPTER 7

The Risks Within the Hedge Fund Industry

Diccon Smeeton

ABN AMRO

Introduction

A quick scan of the financial press reveals many influential pundits still consider the hedge fund industry to be a cabal of rapacious, Gordon Gecko types, or “locusts” hell-bent on financial Armageddon!

Incontrovertibly, the hedge fund industry has witnessed explosive growth since the early 1990s. It no longer bears any resemblance whatsoever to the cottage industry of a decade ago, however, and is a respected alternative asset class essential to an institutionalized investment portfolio, with risks better understood and managed by all participants. Growth has been fuelled largely by significant fund development in Europe and in Asia, albeit from low bases, ...

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