Exiting managers cast pall over hedge fund industry
Written on August 29, 2008
Running a hedge fund was long considered the crown jewel in finance but this summer a growing number of managers have called it quits, unable or unwilling to keep going during one of the industry’s worst-ever years.
Last week Dan Benton, whose savvy technology bets at Pequot Capital Management and Andor Capital Management catapulted him into an industry star, told investors he plans to shut down his fund in October.
Earlier this month, business journalist Ron Insana, who promised clients access to some of world’s most famous hedge funds through his extensive Rolodex, told investors that it was “imprudent” to continue business operations.
And before that, Jeff Dobbs announced plans to shut down Turnberry Capital Management after many of his investors had already asked for their money back.
“There certainly seems to be a bigger number of hedge fund managers going out of business right now than ever before,” said Brad Alford, founder of Alpha Capital Management, an advisory firm that invests in hedge funds payday loans.
While the three men gave different explanations for getting out now, a common theme seems to be that running a hedge fund may not be worth the headache.
Tumbling stock prices, the deepening foreclosure crisis, and rising unemployment rates have made for volatile trading conditions that translated into losses at many hedge funds.
The average hedge fund, after posting the industry’s worst-ever first-quarter returns, is off 3.54 percent this year through July, according to Hedge Fund Research data.
Filed in: money.