Financial speculation is dead, says renowned hedge fund manager Hugh Hendry of Eclectica. That means 80 percent of the 7,000 hedge funds currently in existence will go bust, he says.
“It’s been too easy to make money from financial speculation. I think that ease will disappear,” Hendry told BBC News.
“There are far too many hedge funds. I think the number of hedge funds could fall by a factor of 80 percent over the next 10 years.”
The lack of speculation will put a damper on financial markets, he says. “Stock markets in 20 years time may be no higher than they are today.” And Hendry sees the same fate for home prices.
“Try making money in that environment,” he said. “Try having an appetite to be a hedge fund manager. At that point in time, you’re more keen on being a doctor or an engineer.”
Others agree about hedge fund attrition.
Up to 20 percent of the funds may be liquidated by year-end because smaller managers are having difficulty making money and attracting capital, Justin Federicks, head of capital introductions for Bank America Merrill Lynch, told Bloomberg.
“A large portion of managers are still below high-water marks. Performance is flat, and money hasn’t been flowing to smaller managers.” High-water mark refers to a fund’s historic high.
Hedge funds on average have returned only 1.65 percent so far this year, according to Hedge Fund Research Inc.
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