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Dow Jones hits record high but Hedge Funds increasingly faltering and closing
October 4, 2006 (FinFacts.com)
The Wall Street Journal says that as the Dow Jones Industrial Average climbs to record heights, many hedge funds are stumbling and more than ever are closing shop.
The latest to falter: Vega Asset Management. One of the world's largest hedge funds a few years ago, Vega has suffered losses from a bad bet against U.S. bonds, and is now down roughly 75% from its peak two years ago to about $3 billion in assets. The firm says it has no plans to cease operations.
New figures show that more than 1,000 hedge funds have shut in the past two years, as competition has squeezed profits. The Journal says that even some veteran managers, in a bid to boost returns, have made concentrated bets that have backfired. All this has set up the $1.23 trillion industry for its first meaningful consolidation, Wall Street executives say.
In just the past few weeks, Amaranth Advisors LLC announced plans sell to its investments after losing $6 billion, mostly in the energy markets, heightening the prospects it will close its doors. Narragansett Management LP in New York recently said it will return $800 million to investors. And two European-based hedge funds recently have told investors they are shutting down one or all of their funds.
Vega, which has offices in Spain, London and New York, managed about $12 billion a couple of years back and about $6 billion as recently as January. It once was seen as a winner in the growing popularity of hedge funds among large institutions.
AntiSpin: Trouble in USIP-land. When an asset class becomes "the winner in the growing popularity ... among large institutions" as venture capital did in 1999, "hedge funds" did until recently, and the US stock market is today, you know you're in late innings. Can the boys keep the Dow up long enough to make their year end bonuses? Only time will tell.
October 4, 2006 (FinFacts.com)
The Wall Street Journal says that as the Dow Jones Industrial Average climbs to record heights, many hedge funds are stumbling and more than ever are closing shop.
The latest to falter: Vega Asset Management. One of the world's largest hedge funds a few years ago, Vega has suffered losses from a bad bet against U.S. bonds, and is now down roughly 75% from its peak two years ago to about $3 billion in assets. The firm says it has no plans to cease operations.
New figures show that more than 1,000 hedge funds have shut in the past two years, as competition has squeezed profits. The Journal says that even some veteran managers, in a bid to boost returns, have made concentrated bets that have backfired. All this has set up the $1.23 trillion industry for its first meaningful consolidation, Wall Street executives say.
In just the past few weeks, Amaranth Advisors LLC announced plans sell to its investments after losing $6 billion, mostly in the energy markets, heightening the prospects it will close its doors. Narragansett Management LP in New York recently said it will return $800 million to investors. And two European-based hedge funds recently have told investors they are shutting down one or all of their funds.
Vega, which has offices in Spain, London and New York, managed about $12 billion a couple of years back and about $6 billion as recently as January. It once was seen as a winner in the growing popularity of hedge funds among large institutions.
AntiSpin: Trouble in USIP-land. When an asset class becomes "the winner in the growing popularity ... among large institutions" as venture capital did in 1999, "hedge funds" did until recently, and the US stock market is today, you know you're in late innings. Can the boys keep the Dow up long enough to make their year end bonuses? Only time will tell.