Hedge Fund Managers, which have been the most highly paid financial professionals in the industry, easily topping CEO compensation by a wide margin, are currently struggling in this volatile market. Gone are the days of the fat hedge fund which can keep a stock between their preferred levels, with a bet on each side of the fence. New rules and regulation “game-changers” are affecting the hedge funds in unexpected ways.
Todd Harrison, CEO of Minyanville.com and a former hedge fund trader, stated that the hedge fund community is going through a “cleansing process” and 50% of existing funds won’t likely survive. Companies like Citadel Investment Group, Inc., whose funds fell 30% this year because of losses on convertible bonds, stocks and corporate debt, could possibly be in danger.
Mr. Harrison expects that the $43 billion that came out of hedge funds in September alone is only a taste of what’s to come. Hedge funds are liquidating their positions in order to cover their losses. Mr. Harrison calls them an “acceptable casualty of war” in the eyes of the government and mainstream right now. He sees a bright outlook for the future once the pain of this transition passes and the hedge funds are cleared out.
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