In This Issue: What's Driving The Hedge Fund Boom?: Little did Alfred Winslow Jones know in 1949 that an investing strategy he's said to have created would turn into a $1 trillion-plus industry. And for much of the next 50 years, what we've come to know as hedge funds progressed slowly-before exploding.The Power Of Hedge Funds, Real And Imagined: With their ability to raise billions of dollars from wealthy individuals and institutional investors, hedge funds are often viewed by the capital markets as a power to be reckoned with. Standard & Poor's believes the glamour and mystique of these funds sometimes mask the fact that any significant and disproportionate influence they wield in capital markets is limited to a few relatively narrow sectors. Caveat Investor: Hedge Funds Are Still Risky Business: Over the past decade, there has been progress toward finding ways to avoid another meltdown like Long-Term Capital Management. But there are no rules to prevent traders from placing large bets with assets on hand. Exploding The Myths-Just What Are Hedge Funds?: "Hedge fund" has become a catchall phrase that is often used incorrectly, implying a homogeneous investment class, whereas, in reality, the term describes a wide variety of investment vehicles. The only thing that most hedge funds have in common is that they are private investment companies. Overall Growth Continues In The Fund Of Hedge Funds Industry: A dilemma facing high-net-worth individuals and institutions alike, when it comes to hedge fund investing, is whether to "build" or "buy." Building hedge fund exposure usually entails either establishing an in-house trading platform, or selecting a few external managers over time to gradually build a portfolio. Many institutional investors choose the "build" option. Nonprofits' Alternative Investments Raise Concerns For Auditors: In an accelerating trend, nonprofit institutions that hold endowments or long-term investment accounts have been increasing the portion of the investments targeted to alternative assets, such as hedge and private equity funds. Their motivation for doing so is to improve returns, increase diversification, or reduce volatility. Hedge Funds And Insurers: A Healthy But Tricky Relationship: Although Standard & Poor's believes the presence of hedge fund capital in the market today is a generally healthy development for the industry, we would be concerned about any particular insurer that became wholly reliant on these sources of capital in its risk management program. The Corporate Governance Of Hedge Funds-Who's Minding The Store?: As the prominence of hedge funds has grown in the U.S., so has the funds' ability to influence the corporate governance of companies in which they invest. This raises the question: What about the governance practices of hedge funds themselves? Counterparty And Debt Rating Methodology For Alternative-Investment Organizations: Hedge Funds: As the hedge fund industry, along with other alternative investment industries, grows and reaches out to an expanding cadre of investors, it is meeting increasing pressures for greater transparency. Some investor classes are even requiring that the funds obtain credit ratings. In addition, some funds are accessing bank loans to boost their leverage. | 
