"But recently, hedge funds have fared just as poorly as the banks. The bad economy plays a role in…"

Monday, February 13th, 2012 at 7:00 am

“But recently, hedge funds have fared just as poorly as the banks. The bad economy plays a role in this, of course. But just as important is the fact the hedge-fund industry is almost as overbuilt as the housing and credit markets that drove its profits. In 1990, there were 610 hedge funds in the world. In 2000, there were 3,873; in 2011, there were 9,553, according to a report by Hedge Fund Research. All these funds are chasing fewer surefire trades. “When markets are panicked and there’s global risk fear, the markets move in the same direction,” one analyst at a Manhattan hedge fund says. “It’s just a lot harder to make money.” The easy, obvious plays are oversubscribed, which shrinks margins.”

The End of Wall Street As They Knew It