Hedge fund masters flunk money-making test
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Generating strong returns is getting so tough for hedge fund managers, supposedly the high-earning masters of any market, that some are shutting up shop and more look poised to follow.
Years of choppy markets whipsawed by political risk have crippled performance and left many firms with little in the way of income earned by hefty fees. Now, with an investor base increasingly ready to pull out, several are calling it quits.
Edoma Partners, one of the most talked about hedge fund launches since the financial crisis, said on Thursday it was closing just two years after it started, hit by poor performance and a flurry of investor redemptions.
Pierre Henri-Flamand, the ex-Goldman Sachs trader turned founder, blamed unprecedented market conditions.
Other, more veteran managers, have also decided to exit. Greg Coffey, one of the industry's best known figures, decided to retire early and liquidate one of his funds at Moore Capital, sources said earlier this month.
That followed Driss Ben-Brahim's decision to retire from GLG, the hedge fund he joined in 2008 and now owned by Man Group .
It's been too long that hedge funds haven't delivered what they promised, said one investor, asking not to be named.
The average hedge fund has made its clients 4.86 percent this year, data from industry tracker Hedge Fund Research shows, far below the 12 or so percent investors would have got if they bought a fund tracking the S&P 500. As many as 73 Asia-focused hedge funds shut down this year to end-September, although Europe has seen fewer closures.
Hedge funds market themselves for an ability to protect their clients' cash against market falls, and to make money in all trading environments.
Yet over the past three years, which includes several major equity market sell-offs, the average fund is up less than 4 percent while the S&P 500 is more than 30 percent ahead.