Are we seeing the last rites of the hedge fund sector?

Date: Thursday, January 22, 2009
Author: Financial Advice.co.uk

It has been revealed that a massive $152 billion was withdrawn from hedge fund assets in the first three months of 2008. The figure is far greater than anybody had expected and shows the massive reduction in confidence in a sector which has for many years been pushing the boundaries of the investment world. It would appear that the collapse of Lehman Bros together with the Madoff scandal currently unfolding in the US was the final straw.

When you consider that Lehman Bros was one of the oldest and best-known Wall Street banking names, many people can still not believe the bank has gone. The hedge fund sector was very much dependent on some of the larger players on Wall Street and around the world in places such as London for regular customers and new cash inflows. In the good markets many hedge funds did particularly well although their investment criteria and investment strategies have been tested to the full in light of the credit crunch and the worldwide economy slowdown.

While it may be too early to write off the hedge fund sector there is no doubt that investors have received a massive shock over the last 12 months, something which may take some time to get over.