Chart of the Day: Global Hedge Fund Investments

Love them or loathe them, hedge funds seem to have an aura and gravitas in financial markets, a mystique and attraction that perhaps go well beyond what they deserve. Perhaps this is because many funds have been spectacularly successful attracting enormous interest in the financial media. However, they still remain largely out of reach of the smaller investor as hedge funds are unregulated and not for the feint-hearted.

Despite the failure of several high profile hedge funds in recent months and forecasts that the boom for hedge fund activity is drawing to a close, the scale and scope of hedge funds is staggering, over $1.3 trillion has been invested in thousands of funds across the world; to put this into context there is a global investment ‘universe’ estimated to be worth $50 trillion, including currencies, bonds and equities. So more than one in every fifty dollars is now invested through a hedge fund. So-called ‘sophisticated investors’ entrust their capital to these funds, the money is pooled together and invested by the fund’s chief investment officers.

Revision: Ownership and Control

Is the new breed of shareholder activist an important voice and counter-balance to the power of entrenched management - willing to stand up to poor ethical behaviour and highlight ineffective management? Can they help to overcome the principle-agent problem? Or are they merely aggressive corporate raiders seeking short-term corporate change merely for their own personal gain? This revision note is aimed at A2 economists and covers the topic of the divorce between ownership and control.

Revision note:

Ownership_Control_Activist_Shareholders.pdf