Hedge Fund Regulators
Hedge Fund Regulators, Investors & Managers
This morning I got an email from a friend in the industry who is in charge of developing relationships with hedge fund executives. She was preparing a report for a committee at her organization and wanted some feedback on the validity of many reports she had read over the last month on the state of the hedge fund industry. While they would be too lengthy to list below these are reports that you may find within my November and December blog archives produced by mainstream outlets such as the WSJ and FT. Here is my general response to what I see happening in the industry:
It is true that leverage is harder to get for some funds and impossible for some more exotic asset classes. That said many hedge funds are operating as normal and a decent percentage of the industry was never using leverage in the first place.
While many hedge funds have been shot down and small hedge funds will have a hard time raising assets the individuals quoted within some of these articles are 100% wrong on small hedge funds riding into the sunset. I usually hear from 3 new hedge fund startups every 10 days. In the last 36 hours I have heard from 6 new startups and everyone I talk to who knows what is going on thinks there will be hundreds if not over 1,000 new funds in 2009. The market is at an all time low and thousands of millionaire bankers have lost their jobs - they have nowhere to go...many will start funds. Raising capital will be hard but many will try and have at least $15-20M in friends and family money to start with.
Regulations will come and hedge funds will be controlled more within specific asset classes but not nearly as much as banks will. I believe hedge funds will prosper again as a group as the market eventually corrects (whenever that is) and investors move away from cash.
I believe many managers will be charging 1 and 20 or remain charging 2 and 20 and that fund of funds will be pressured to lower their fees after dismal protection from downside losses.