Halloween 2008 | Scariest One Yet

Halloween 2008

Halloween 2008 | Scariest One Yet

2008 is proving to be the hardest market which hedge funds have faced since the first hedge fund was formed half a century ago.

The top 5 scariest things about the current financial crisis and the state of the hedge fund industry:
  1. Hedge fund gating clauses, lock-up periods and other agreements screen the true level of hedge fund redemptions. Is it hard to know how much capital is waiting to leave the industry.
  2. While I don't believe it, Soros could be right. The hedge fund industry could shrink by over 50% and it could take 5-7 years to climb out of that hole as an industry.
  3. I have not ran an analysis of this yet, but I seem to be seeing more frequent cases of hedge fund fraud. The media loves to highlight these rare cases, the last thing the industry needs is for these cases to become less rare.
  4. This financial crisis has come at a time when some headway was being made by a few hedge fund managers and industry association groups towards lessening hedge fund regulation, specifically on marketing regulations here in the US. The crisis may have negated some of those efforts for the time being.
  5. Even the most intelligent, well-informed, most sophisticated, well diversified and nimble trading managers in the world have been hit hard over the past 2 months.
To review some of the industry news which has come out on specific hedge fund managers please see these Hedge Fund Tracker Profiles:

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Anonymous said...

I agree, I think Soros is off. He is always making extreme statements regarding the markets. Sometimes he is right but I just can't see the industry shrinking by that much.

Anthony J. Alfidi said...

Anybody who put money into a hedge fund with a five-year lockup back in 2007, when the crunch was starting, can't get out until 2012. No way are equity markets going to be back to 2007 levels by then. Major losses are a sure thing. Volatility induced by regulators changing the game at will is the death knell of many quant strategies.

Richard Wilson said...

I'm not sure where stock market levels will be by 2012 but I'm betting those with the information, insight and skill to take advantage of the next bull market will most likely start or join a hedge fund, or continue to run one and grow the industry further. I think the industry as a whole will strongly recover by 2012, but many investors may be stuck in funds which may not perform well or could close down.

What does everyone else think about this?

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