The hedge fund mini-crisis
The hedge fund industry may be just as overbuilt as the credit and housing markets were.
The hedge fund industry may be just as overbuilt as the credit and housing markets were.
Yesterday I linked to Gabriel Sherman's sprawling State of Wall Street piece in New York Magazine.聽 There was one particular quote about the hedge fund industry's own little mini-crisis - anonymous of course - that deserves a highlighting here as quote o' the day...
Sherman points out that there were 600 hedge funds in 1990, ten years later there were 4000.聽聽 Now there are almost 10,000, a few thousand more than anyone really has any use for.聽 The barriers to entry have basically disappeared (raise a million bucks, spend a third of it on admin stuff and you're in the game).聽 But all of the data says that the bottom half of the industry is starving - virtually all of the flows have been going to the biggest funds out there for a few years now.
When Sherman says that the hedge fund industry is just as overbuilt as the credit and housing markets were, I completely agree.