The view from Greenwich

A buddy who is tight with the hedge fund crowd writes:

One of the bigger concerns percolating is the fear that many hedge funds will soon close. A combination of factors create the perfect storm: large redemptions at the end of Q3, the SEC ban on selling stock short and efforts to reduce leverage. With your performance down significantly, many funds are way below their high water mark and won’t be earning a performance fee for months. And without leverage (or with less leverage), it’s going to be hard to even justify the 2% management fee and 20% carry you charge. Unless your fund has more than a $1 billion in assets, it will be hard to generate the management fees needed to keep talent and sustain your operations. A large consolidation of the industry and many closures could be the story over the next six months.