Tough Times Ground Hedge Fund High-Fliers

Specialized investment industry dragged back to earth by shaky market

By Nick McMaster, Newser Staff

Posted Sep 12, 2008 12:41 PM CDT

(Newser) – The recent market turmoil has taken a good deal of the shine off of hedge funds, as managers are unable to reproduce their heretofore exemplary results in poor market conditions, the New York Times reports. The average hedge fund lost 4% this year, the worst overall results in the industry’s short history, and 2008 has seen some high-profile collapses.

Only $30 billion in new money has been invested in hedge funds in the first half of this year, from $118 billion in the first 6 months of 2007. And the large pension funds and university endowments that blew up the industry fivefold in the past decade are warier of investing in hedge operations. "It’s been a bloodbath,” says one hedge-fund tracker. Expect bonuses to take a hit this year, as managers see further lean times ahead.

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Former Bear Stearns hedge fund manager Ralph Cioffi exits Brooklyn federal court following a scheduled hearing July 18, 2008. (AP Photo)

It's getting harder in the investment world to make spectacular returns. (Shutterstock)

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I think we’re seeing what these hedge fund managers really, truly are. And some of them really can’t make money in a difficult environment. - Robert Discolo, AIG Investments

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Tough Times Ground Hedge Fund High-Fliers