Hedge Funds Financial Crisis

Hedge Funds Financial Crisis

Hedge Funds Still Feeling the Pain of the Financial Crisis

The hedge fund industry mounted an impressive recovery after the disastrous performance during the financial crisis and recession. Still, many hedge funds are trying to make up for the big losses suffered during that period. Hedge funds, such as the Citadel Group, are still working toward the funds' high water marks, making this year a critical one for the industry.
But despite strong performance, Mr. Griffin has not climbed back from the losses endured during the financial crisis. Citadel’s flagship fund is still 15 percent below its peak, according to people with knowledge of the firm who were not authorized to speak publicly.

Even as the industry reclaims its former swagger, Citadel and hundreds of other hedge funds are struggling to hit their so-called high water marks, their historic highs at which they can begin collecting profits again. The research firm HedgeFund.net estimates that roughly 35 percent of the 2,500 funds that have continuously reported since 2008 have not recovered — with smaller hedge funds dominating the list.

With so many firms yet to make a full comeback, analysts and industry experts anticipate a shake-out in 2011. Troubled funds risk losing top traders or analysts to rivals, or worse, closing down altogether.

“For the folks back in the money again, the industry is in a pretty healthy place,” said William C. Crerend, chief executive of EACM Advisors, a roughly $3 billion firm that invests in hedge funds. “But for the subset for whom that’s not the case, there is a lot riding on this year.” Source

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