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How Are Hedge Funds Changing?

Hedge funds have yet to match the returns that they achieved in the years before the financial crisis, but the industry continues to grow. One big change, says Putnam Coes ’94 of Paulson & Co., is that starting a new fund is harder than ever.


Ten years ago, hedge funds were flying high, getting double-digit returns in the bull market that preceded the financial crisis. Since the crisis, they haven’t been able to match that performance, and in 2015, with the market as a whole hitting headwinds, they slumped into negative territory. But that doesn’t mean that investors are fleeing hedge funds. Last year, assets under management increased by about $180 billion, bringing total assets to roughly $3.2 trillion. Since the financial crisis, funds’ assets have grown by more than $1.2 trillion.

Putnam Coes ’94, chief operating officer of Paulson & Co., told Yale Insights that the biggest shift over the last decade has been increased reporting requirements and other factors keeping new players out of the industry. While new funds are being created, he said, they mostly originate with existing firms. “It used to be a fairly low-barriers-to-entry industry,” he said. “A couple of guys, a computer, a few brokerage accounts and a prime broker and you could set up a hedge fund.”

Chief Operating Officer and Partner, Paulson & Co.