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FT: 'Hedge fund collapse is on the way'

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  • FT: 'Hedge fund collapse is on the way'

    From the FT. Another gloomy view, if you are a hedge fund manager. However, this manager has some positive things to say further down in the article about emerging markets and commodities, with particular emphasis on gold.

    Nothing here is new to the iTulip community (especially speculative investment vehicles mascarading as "hedged" funds), but I see this article as an indicator that privately held views among informed investment professionals are seeping out (beyond EJ's excellent interviews on iTulip) into the public arena. Just another data point...

    'Hedge fund collapse is on the way'

    By Steve Johnson
    Published: October 8 2007 03:00 | Last updated: October 8 2007 12:58

    Investors will withdraw $500bn (245bn, €355bn) – a quarter of the asset base – from hedge funds in the next year, leading to the collapse of a "large number" of hedge funds.

    So predicts Giles Conway-Gordon, managing partner of Cogo Wolf, a San Francisco-based fund of hedge funds, who believes investors are increasingly dissatisfied with industry performance, and that computer-driven quantitative hedge funds now simply run too much money to make healthy returns.

    "I don't think it [the hedge fund industry] can support $2,000bn of assets. I think we are going to see large numbers of hedge funds go out of business, and rightly so," he says. "Hedge funds are supposed to avoid losses when things are bad, but there are very few that can break even then. I think a lot of them are not earning their keep.

    "There's a hell of a wave of money, say $500bn, coming out of hedge funds over the next year. There is going to be more of a focus on demonstrable results and track records that do not rely on 10-12 times leverage.

    Link to article (on my screen I had to scroll down quite a ways to see it):