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Fund of Funds Investing: A Roadmap to Portfolio Diversification by Richard S. Bookbinder, Daniel A. Strachman

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Chapter 3. How Large Is the Market?

It seems that everyone on Wall Street wants to work for or run a hedge fund. It seems that everyone on Main Street wants to invest in a hedge fund, and then there are some of us who just want to know how many hedge funds there are and how much money these capitalists are managing. While the two statements are true—it is impossible for us to get an answer to the last question.

HEDGE FUND DATA IS WEAK

Comprehensive hedge fund data is exceedingly deficient. Since there is no consolidated database and individual investment managers voluntarily report results to various databases, it is truly impossible to arrive at a true count of the industry. Unlike mutual funds, which are required by an act of Congress to report their returns and assets under management to FINRA (Financial Industry Regulatory Authority) on a daily basis, there is no such rule for hedge funds. This is a serious problem that Congress and the powers that be need to fix if they ever really want to get their hands around the hedge fund industry.

There are at least 10 recognized hedge fund databases that collect and report hedge fund data with some regularity. The most noteworthy include but are not limited to Credit Suisse/Tremont, Hedgefund.net, Morningstar, and Barclay Group. Many managers that are closed to new investment dollars or those that do not want to share performance results with the database simply don't list the existence of the fund and choose not to provide returns to the ...

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