Are some hedge funds sinking or just sailing into the sunset?
Aug 14th, 2007 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & MetricsWith a traffic jam of potential hedge fund blow-ups developing in Greater Hedgistan (mainly among the large quant funds), we are sure to hear a lot in the coming months about the “high failure rate” of hedge funds in general.
In fact, GMO’s Jeremy Grantham got things started early last week with a prediction that “…within 5 years…up to half the hedge funds…in existence today will have simply ceased to exist.” (Grantham Says Hedge Funds, LBO Funds to Collapse)
Widely-read newsletter author John Mauldin took issue with Grantham’s typically dire prediction by pointing out that this would be in keeping with the attrition rate of typical small businesses (which, of course, most hedge funds are):
“…while a lot of hedge funds in the market today will no longer be here in five years, the real reason is that they simply did not generate enough cash flow for themselves and their investors to survive. You can actually have a profitable year and see your assets under management leave…”
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[...] AllAboutAlpha examines whether hedge fund attrition is as bad as meets the eye. [...]
[...] AllAboutAlpha examines whether hedge fund attrition is as bad as meets the eye. [...]