Now is not a good time to run a hedge fund. Panicking investors are pulling out of the underperforming funds, and that alone could cost the industry 15% of its assets by year’s end, Bloomberg reports. Hedge funds aren't seen as a primary cause of the global financial crisis, but the selloffs are contributing to huge market swings and raising the prospect of greater oversight. “Even the healthy hedge funds are being forced to sell,” said one investment manager.
The industry has already lost $200 billion in value this year, the Washington Post notes, with the average fund dropping 18%. “I have never seen a market as full of panic as” this, said one fund founder. At a recent conference, executives predicted that up to a third of all funds may be out of business by year’s end. “In a fairly Darwinian manner, many hedge funds will simply disappear,” said one CEO.