AUM
Seemingly basic question but don't quite grasp the full concept. Why do hedge funds not accept any subscriptions at certain times. A.ka. Why doesn't a hedge fund want to keep growing its AUM in any set of circumstances?
Maybe if its strategy isn't scalable?
^^^^^^^^ This. A firm can't necessarily double the size of each bet if its AUM doubles, especially in small-cap/distressed/illiquid debt.
Plus more investors=more headaches (though less risk associated with redemption).
It's a performance game, they can make 20% for outperformance, but only 2% on AUM. The larger your asset pool, the harder its to find more winning ideas. For example, the Fidelity Magellan Mutual Fund is so big that it can realistically only invest in large and mega-caps - and there are not a lot big opps there
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