The capacity question

With hedge funds now managing more than $1trn, the wave of investors splashing money at the industry may well find that not all assets are equal

Many commentators believe the hedge fund industry is faced with increasing capacity constraints, but to what limits are they referring? We suggest discussions of hedge fund capacity should consider a number of issues, including; the level of trading opportunities in a particular strategy; the total number of players in a strategy; as well as concerns at a fund level, such as resource constraints.

Over time, numerous industry surveys have taken a shot at estimating capacity. In 2001, a survey of