Market Analysis : Hedge Fund Industry

1386 Words Feb 21st, 2016 6 Pages
Market Analysis
The Hedge Fund industry ended 2015 with about $2.9 Trillion dollars in Assets under Management (AUM). The average return was between -0.05% and 1.63%. This sector of the investment industry has grown at an explosive rate, in the year 2000, there was an estimate of 4,800 funds while today the number is closer to 11,000. Nevertheless, there has been a slowdown in the number of new hedge funds. This past year, an average of 172 new hedge funds opened per quarter which represents the lowest level since 2010. The average leverage ratio of global funds is 2.7.
Current Environment
We believe we couldn’t have chosen a more exciting period to begin this venture. The global economy is being affected by several circumstances that increase financial uncertainty. For instance, the price of oil is near all-time lows, which has put significant pressure on Emerging Markets that have high exposure to the swings in the price of petroleum (e.g. Venezuela, Mexico). Furthermore, a majority of financial experts and analysts suggest that Latin American markets will continue to decline. The US dollar has appreciated in the last few quarters while the Yen has depreciated due to deceleration of China’s economy. Commodities’ prices are very far from their all-time highs. The US Federal Reserve has decided to stop their Quantitative Easing policy and, therefore, increased the interest rates for the first time since 2006. Meanwhile, the yield of bonds continues to decrease, and…
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