CHAPTER 16

Opportunities and Challenges for Hedge Funds

Hedge funds transitioned from a niche industry in the 1980s catering to small number of wealthy families, to an almost mainstream asset class in the portfolios of most large institutional investors (pension funds, endowments, etc). By the 2000s, these funds reached a magnitude nearly commensurate with traditional assets, equities, and bonds—managing about two and a half trillion dollars by 2014. Today there are nearly as many hedge funds as there are mutual funds.

But hedge funds’ move from the margins to the center of the investing world pose new challenges for the industry. This chapter briefly outlines several of the main challenges and opportunities hedge funds will face in the coming ...

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