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The New UberRich December 16, 2006

Posted by tkcollier in Business, Life.

The Atlas of New Money – WSJ.com
Just as the hedge-fund industry is remaking the global economy, so too is it remaking the world of wealth. A surge of money is reshaping these wealthy communities as drastically as did the dot-com boom of nearly a decade ago or the wealth of such industrial icons as Rockefeller and Carnegie did a century ago. In less than a decade, hedge funds have created a class of centimillionaires. Lightly regulated, with a propensity for high risk, hedge funds have drawn wealthy investors and institutions looking for bigger paydays than they can get from stocks and bonds.

The roughly $1.2 trillion controlled by the world’s 8,000-plus hedge funds is dwarfed by the $10 trillion in U.S. mutual funds, which are regulated and make their investments public. While mutual funds generally charge fees of 1% or 2% of assets, hedge-fund managers typically add on an additional 20% or more of any profit. Last year, according to Hedge Fund Research, hedge funds returned 9.3% on average. The top 26 hedge-fund managers last year received pay averaging $363 million — up 45% from 2004, according to Institutional Investor’s Alpha magazine.

Like other booms, this one could bust. Hedge funds have returned about 11% this year — down from more than 31% in 1999, according to Hedge Fund Research, a Chicago firm.


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