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excellent performance in different market conditions. Hedge fund managers don't like comparing themselves to a benchmark; that is relative performance. Doing so is usually to placate investors who want or need some benchmark. Managing downside risk also differentiates them from other types of managers.

Between 4,500 and 6,500 hedge funds exist with combined assets of $350 billion to $450 billion. Assets in the hedge fund industry are highly concentrated. The average hedge fund size is about $130 million. There are about 55 hedge fund managers with assets of over $1 billion. (See Table 3.1.) In contrast, an estimated 200 managers have assets under $10 million.

These numbers cannot be precise since no legal definition of a hedge fund exists. While there is no universal agreement on the size of the hedge fund industry, it is generally accepted as having exhibited strong growth. Based on a narrow definition of what hedge funds are, the following estimates show the strong growth during the 1990s1:

Because there is no legal definition of a hedge fund, some people define hedge funds differently than others. For example, some may include managed futures or currency traders or emerging markets, while others do not. Some may include long-only funds that use considerable leverage, while others do not.

Another issue is the increasing degree of hybrid products in the alternative investment arena. For example, some hedge fund managers are adding private equity features such as longer-term lock-ups. Meanwhile, some private equity managers are adding hedge fund features.

Furthermore, there are no regulatory bodies in the United States that a hedge fund must report to. You can't go to the Securities and Exchange Commission (SEC) to find out how many hedge funds are registered in the United States. However, if a hedge fund in the United States does trade at least one futures contract, it must register with the Commodities Futures Trading Commission (CFTC).