Chapter 9

Hedge funds

In the decade before the credit crunch there was an upsurge in money managed by hedge funds. In the early 1990s, they were fringe investment vehicles, managing money for some enterprising private investors as well as the hedge-fund managers themselves. Then they became increasingly popular with endowments, innovative pension funds and insurance companies. Total assets managed reached a peak in late 2007, according to BarclayHedge, a hedge fund industry research and database provider, of over $2.1 trillion, before declining by over 50% to just under $1 trillion by March 2009 through a combination of negative returns and investor redemptions. Private clients seem to have accounted for the bulk of these redemptions, leaving the hedge fund ind....