There is must-read piece in the NY Times this weekend on the hedge fund “bubble”. Whether you are a bubble believer or not, the growth in assets in said category from $40-billion to $1-trillion in fifteen years is cause enough to be paying close attention.
My view: There isn’t a hedge fund bubble, per se. After all, capital is highly mobile, and if you under-perform as a hedge fund you will quickly be a fund-less fund. That said, however, it is likely true that there is a comp bubble: A lot of people are having a three-year party with too many assets, and at a 1-and-20 comp (1% management fee plus 20% of the upside) it doesn’t take all that much in terms of assets to pay yourself very well indeed — for a while.