The Next Chapter for Hedge Funds

Two data points surfaced in recent days that underline why we’re so passionate about democratizing trading with open source software.

First, hedge fund returns are up. And not just up from the carnage of last year, but with 2.5% returns in September, it’s looking like hedge funds could have their best year since 2003.  According to the Eurekahedge Fund Index — and bolstered by a number of other hedge fund research firms — the industry grew by $26.3 billion last month, bringing total assets managed to $1.42 trillion.

Such news, coming just months after record losses, illustrates that hedge funds are coming back aggressively and when you dig into the numbers, you find that funds with medium or high-frequency strategies had even higher returns.

Now to that other data point. Hedge Fund Research is reporting that hedge fund creation is up but the size of those hedge funds is down. And while it’s true that the new funds will have to compete with the larger established players for investment funds, we see this as a positive trend for the industry.

The reason why is simple. Bigger isn’t always better. Just look at the economic data that show that small and medium businesses provide the bulk of our jobs and most of the muscle behind a recovery.

In the case of the hedge fund industry, we’re seeing a resurgent wave of creative capitalism rising at the hands of small groups of traders who are making smart use of technology to leverage their trading strategies and secure returns. Many of them came from the big funds that posted last year’s dismal returns. They learned from the experience and are taking a new approach this time around with funds that may be smaller but are also more nimble.

We’d like to think that it’s this generation of hedge funds that Marketcetera’s trading platform is made for…

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