Ex-Harvard Money Man Says Half Of Alts. Firms Will Disappear

Mar 19 2009 | 2:46am ET

The former head of Harvard University’s endowment is adding his voice to the harbingers of doom and gloom surrounding the alternative investment industry.

Amidst a series of reports showing hedge fund assets have slipped precipitously, Mohammed El-Erian said that half of hedge fund and private equity firms could go belly-up or merge in the face of massive investor redemptions.

“It would come as no surprise if at least half of the entities in this space were to disappear in the next two years, either through mergers or failures,” El-Erian, now CEO of Pacific Investment Management Co., wrote in a Financial Times column.

“The alternative sector faces a perfect storm,” he added. “These once-prominent pools of capital are finding it harder to secure financing.”

According to some reports, as many as 15% of hedge funds closed their doors last year, as the industry has lost as much as $1 trillion in assets.

El-Erian wrote that hedge funds’ more traditional rivals, such as mutual funds, are also in danger, with the market turmoil cutting operating revenue at some mutual fund firms by half.


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