For the first time since the 2018 fiscal crisis, the hedge fund industry is contracting. According to BlackRock CEO Larry Fink, this has resulted in the occurrence of a “mini 2008-2009 . . . We saw a massive amount of deleveraging” from hedge funds.”
HFR President Kenneth Heinz said:
“Hedge fund outflows in Q4 were driven by several factors, most notably investor reaction to steep losses in traditional asset investments and the sharp spike in equity market volatility leading to redemptions.”
So what are attitudes to hedge fund establishments with this backdrop? According to founder and CEO of hedge fund recruiter IDW Group Ilana Weinstein:
“You have to be borderline crazy to be starting a hedge fund in this environment and the only way you should do it is if you feel you have something differentiated to offer,”
And (former) hedge fund manager Philippe Jabre asserted that:
“The last few years have become particularly difficult for active managers… Financial markets have significantly evolved over the past decade, driven by new technologies, and the market itself is becoming more difficult to anticipate as traditional participants are imperceptibly replaced by computerised models.”
Managing Director and Global Head of Hedge Funds at Cambridge Associates, LLC, Eric Costa said:
“2019 is an important year for hedge funds. Over the last eight to 10 years, capital markets were up and to the right, a suboptimal environment for hedge funds. [however] “rising volatility, lower correlations and higher dispersion mean that the year is setting up nicely for hedge funds,”
Co-CIO of Bridgewater Associates LP, Robert Prince, said:
“We’ve been in a great market for the past nine years that benefited long-oriented managers because many assets did very well in an environment of falling yields, quantitative easing and good growth…[the reversal of those conditions makes it much harder for long-biased managers but is] an opportunity to demonstrate skill for strategies that do not have a long bias.”
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