Money managers under the microscope
Back when the hedge fund industry was barely into its 20s, numbered just 150 funds and managed all of $1 billion, you might have thought times were simpler; untroubled by the kinds of questions and concerns that now dominate after a turbulent year.
Browsing through a 1969 article in Fortune magazine by Carol J Loomis you could be forgiven for concluding the industry has barely moved on. If the last year has seen the painful payback from a frantic pursuit of returns, then so it was 1969.
Loomis cites the founder of the first hedge fund , Alfred W Jones:
“The trouble began, he says, in the 1966-68 period when the craze for performance swept the investment world and when all sorts of money managers, including those in his own shop, got overconfident about their ability to make money.”
The losses suffered by hedge funds in 1969 were sharp and shocking. The Fortune article notes hedge funds with losses of up to 47 percent and points to a series of players underperforming the broader market despite the so-called cushion that short-selling provided. Average hedge fund performance in 2009 has outpaced that of wider equity markets, but we are still hearing today the same questions that Loomis felt drawn to pose:
Victor Haghani, a co-founder of LTCM later involved in its liquidation and now a private investor, was opining at a LSE conference on Monday that simply cutting back funds’ borrowing after the carnage of last year may not be a strong enough lesson for the industry to learn.
Welcome to the launch of Hedge Hub, the new Reuters Hedge Fund Blog.
Our aim is to provide insight into, and encourage debate about, the rapid changes in the hedge fund industry as it faces its biggest challenge ever.
We‘re going to offer a wealth of interesting news, points of view and discussion topics based on a wide variety of hedge fund news sources, from Reuters to other blogs and websites, and we’ll also be hearing from guest contributors from within the industry.