Analyst: Hedge Fund Recovery Won’t Come Until 2013

Mar 13 2009 | 12:39pm ET

Don’t be fooled by the turnaround in performance and lower redemptions posted by hedge funds in the early going this year. One analyst says there are more bad times to come, and that the industry won’t fully recover for another four years.

Hedge fund assets under management will fall by another 18.2% this year, according to Brad Hintz at Stanford C. Bernstein. Hedge funds will continue to lose assets into 2010, falling to less than $1 trillion globally before beginning the long, slow climb back.

What’s more, Hintz says that about one in four hedge funds with close within the next 12 months.

“The reduction in assets under management in the hedge-fund industry suggests that banks and brokers will book significantly lower revenues from these clients over the coming year,” he told Reuters.

Indeed, Hintz paints an even grimmer picture of the future for prime brokers than he does for their clients. As hedge fund assets fall, prime brokerage revenues will fall along with them, dropping 32%, while earnings will fall by more than half. But Hintz warns that this is “more than the challenge of simple cyclical revenue decline,” noting that the changes to the prime brokerage industry will permanently affect their structure and profitability.

Hintz also ventured to predict the “core of leaders in the prime brokerage market of tomorrow.” Led by JPMorgan Chase, it includes Goldman Sachs Group, UBS, Morgan Stanley, Deutsche Bank, BNP Paribas, Credit Suisse Group, Bank of America, Barclays and Citigroup.


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...