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Overgrown and full of deadwood

Size is a well-known impediment to fund-management sprightliness and profitability. As traditional institutional investors leap belatedly on the bandwagon, that's become as true of hedge funds as of staider operations. The likely outcome: significantly declining returns. By Mike Steinberger.

Riding the Tiger

A speculator's latest lesson


Hedge funds have become fashionable in the strangest places. For geopolitical insights, Tiger Management's Julian Robertson now turns to a board that includes Margaret Thatcher and Bob Dole. When not rescuing wayward former Soviet republics or jousting with Asian potentates, Quantum Fund founder George Soros takes to the pages of The Atlantic Monthly and other highbrow journals to inveigh against the perils of postmodern capitalism. Paul Tudor Jones pals around with Bill Clinton, crusades on behalf of the environment and is often touted as a possible candidate for political office himself. James Cramer currently stars in a shoe commercial.

But perhaps the strangest new fans of the hedge fund are traditional institutional investors. Over the past eight months, major institutions have placed as much as $3 billion with them - a drop in the bucket by their standards (at last count, US institutions alone had $13 trillion in assets), but enough to account for almost 30% of the new money flowing into funds. College and university endowments, considered the shrewdest of the lot, are leading the charge.


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