Not a lot of sunshine and rainbows this week at the Reuters Hedge Fund and Private Equity Summit, being held in Hong Kong, London and New York. Here’s a sampling:
There will be more hedge fund collapses this year as many managers struggle to borrow the new money they need to trade with and face investors disappointed by recent losses, said David Bailin, who heads Bank of America’s alternative investment group, which has already fired roughly 15 percent of the hedge fund managers it uses. He predicted rough trading for specialized fixed income funds, and said that BoA execs are “not big funds of quant funds … People are willing to trust black boxes only when they work.”
Smaller Asian hedge funds are in for a painful round of consolidation, according to Eugene Kim, chief investment officer of $250 million hedge fund manager Tribridge Investment Partners. “Investors are demanding more of managers in regards to operational infrastructure, compliance, risk management … you have to have a critical mass of assets under management to be able to pay for all of that,” he said. “A lot of marginal managers who have not been able to make it to the next level in terms of fundraising, in terms of size, are either going to have to merge or get bought out or shut down.”
Private equity deals will remain small in size and volume for some time compared to their 2007 peaks, as a logjam of debt prevents banks from adding more to their portfolios, Quadrangle managing principal Joshua Steiner told Reuters reporters and editors. The $34.1 billion takeover of BCE — still yet to close — may prove to be the high water mark for the foreseeable future, he said: “Deals of that size will take a long time to come back, if ever.”
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