A Bourse Diary

Thoughts on stocks, speculation and ... life

Monday, February 12, 2007

Much ado for what?

Hedge Fonds have under management ca. 1% of all world's financial assets, but represent up to 20-30% of trading volume. This is the result of a recent industry report as Vincent Fernando points on SeekingAlpha: Hedge Funds Manage 1% of Global Assets, 25-60% of Global Trading.

In the abstract we read:

On the latter score, U.S. hedge funds shoulder two-thirds or so of worldwide margin debt, or something in the neighborhood of $300 billion. Truly staggering, furthermore, is the Dresdner Kleinwort estimate that hedge funds account for between 25% and 60% of the trading in global major markets. And, we're reminded, it's the marginal trader that makes the market.

And transaction costs sum up to 4%-5%, which is actually much. So no wonder, the hedge fonds have a tough game to play - and given their recent growth even harder in the future.

But why not ask: so much action trading - what for? Is the performance good? No, no. But they just can't sit still.


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