Hedge Fund Business Gets Worse, Nice While It Lasted
December 15, 2008 by Douglas A. McIntyre
The number of hedge funds topped 10,000 earlier this year. Watch for about 3,000 of those to be gone soon.
According to Bloomberg, "Almost a third of hedge funds will shut or merge after the $1.5 trillion industry posted its worst ever performance this year."
That may be bad for hedge funds, but it is worse for the broader market.
Most of the weak funds will be selling into an already weak market to bring in cash to cover client resumptions.
On top of that, a number of the funds used leverage to increase the "value" of their investments. Banks who loaned that money want it back.
When that note is due, it just causes more selling.
It would not be surprising if several hundred billion in investments are being dumped to get out whatever capital is left as funds close.
Douglas A. McIntyre
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