The Fate of Hedge Funds

Dear Friends,

Here is a good video clip explaining the Hedge Funds situation. A potential crisis looms where Professor Roubini believes that a few hundred Hedge Funds will close down.

On the other hand, it was stated on CNBC that Hedge Funds are holding US$600 billion of cash, waiting to invest.

Who is right? BOTH. The turmoil in the financial markets is bound to culminate in a shakeout of a number of hedge funds, some say, hundred, others say, thousands.

The Hedge Funds with the cash, are those doing well relative to the Hedge Funds Industry, which, on average, has lost 17.6 % for their clients thus far this year. The poor performance coupled with market uncertainty are the reasons why clients are pulling out and cash redemptions are causing distress selling.

However, irrespective of what happens in the next one to two years, in my opinion, the Hedge Funds Industry will survive, and eventually be one of the industries to thrive, even before the general economy moves in a significant way.

Why? Because there will always be rich people looking for better returns than Fixed Deposits on their money. And as long as there are rich people, there will always be Hedge Funds who will serve their needs. It's a question of which Hedge Funds Strategy that the clients believe in. And also, it's a question of timing, as to when the markets will be considered sufficiently safe. When the cat (market turmoil and uncertainties) is away, the mouse (the Rich and the Hedge Funds) will come out and play ..... again. :) This is the reality of life.

Best wishes,

Ooi