Bleak Portrait Of Hedge Fund Future Seen At Summit

Nov 30 2012 | 12:21pm ET

Pessimism among and about hedge funds has never been far from center-stage at this week's Reuters Global Investment 2013 Outlook Summit in London.

Speaker after speaker has offered a rather bleak picture of the industry's future, blaming managers, regulators and the current market environment for hedge funds' woes.

"We're now [in] a world where we recognize that the ability to make money is a lot more difficult and there aren't that many people who can do it," Hermes Fund Managers CEO Saker Nusseibeh said. "There simply aren't enough; it just doesn't exist."

"Lots of hedge funds are not making even a positive return," he continued darkly. "They should be doing 4% to 5%. And they're not."

"Suppose it's the smartest people with the smartest models, and they've had 10 years' practice. If you give me 10 years, I'm sure I can come back and play the piano badly."

Pioneer Investments' Giordano Lombardo warned that new regulations and increasing sophistication among traditional funds have narrowed the space in which hedge funds can distinguish themselves.

"The hedge fund world is going to be more regulated and follow more the rules of the general investment industry," he suggested. "That will force out of the market players not willing to play the game that way."

"The sector is going through a maturity crisis," Lombardo said. "Post-teenager, you have to decide what to do with yourself."

The market environment isn't helping, according to BNP Paribas Investment Partners chief investment officer William De Vijlder.

"Alpha delivery can be very difficult. If you have risk-on, risk-off, it can be more difficult."


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