Duran leads Al Nassr past Yokohama Marinos into AFC Champions League Elite semi-finals    Al Ahli cruise past Buriram into AFC Champions League Elite semi-finals    Saudi Arabia offers condolences to Iran following deadly Bandar Abbas port explosion    Saudi Arabia welcomes Palestinian leadership reforms, appointment of Hussein Al-Sheikh    Ministry of Hajj issued over 150,000 Nusuk cards for the Hajj of 2025    Saudi Arabia deports 12,866 illegal residents in a week    Pope Francis laid to rest at historic funeral in Rome    Massive explosion at Iran's Shahid Rajaee Port injures over 500 people    SFDA clears first 44-ton medical shipment for Hajj pilgrims    Over 13 million worshipers pray at Rawdah Sharif in a year    Saudi orchestra to perform at Sydney Opera House in May    Al Hilal thrash Gwangju to reach AFC Champions League Elite semi-finals    Nammos Amala Resort to open soon with Saudi-Greek designs    Saudi Arabia completes 674 Vision 2030 initiatives, achieves 93% of KPIs as ninth-year milestone marked    GACA chief chairs 16th meeting of the Steering Committee on aviation's strategy    Alkhorayef praises advancements in Al-Kharj food industries sector    Saudi Theater Commission launches its Work and Learn Project in UK    The season has begun — and one comment shook us all    Average life expectancy in Saudi Arabia rises to78.8 years    Famed Philippine film star Nora Aunor dies at 71    Pakistani star's Bollywood return excites fans and riles far right    Veteran Bollywood actor Manoj Kumar dies at 87    Bollywood actress vindicated over boyfriend's death after media hounding    Grand Mufti rules against posting prayers and preaching in mosques on social media    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Hedge funds tip-toe toward an uncertain future
Published in The Saudi Gazette on 11 - 12 - 2009

In a world where there were only a few hundred managers and funds were relatively small, investors were fully apprised of what was happening in their portfolios.
Ultimately, it will be the investors and their purse power that will weed out the industry.
Last year hedge funds did not make many friends if they lost money, halted withdrawals and charged their usual high fees.
Veteran manager Howard Marks of $67 billion Oaktree Capital Management in Los Angeles said the past two years have revealed which managers really helped clients and which ones were merely propelled by a bull market.
Looking ahead, he added, “2 & 20” as an industry standard could come under fire as investors push back.
“Getting money with incentive fees should be special. The fact that everybody could do it means something was wrong,” said Marks, whose firm was among the few winners last year. “The ones who did a bad job should get out of the business.”
Throughout 2009 large institutions like the California Public Employees' Retirement System (Calpers) have lobbied their fund managers to revise their terms. Some industry surveys showed the average cost of hedge funds may already be drifting lower, closer to 1.5 percent management fees and 15 or 18 percent of profit.
A few industry veterans say the old fee structure bears some blame for encouraging over-expansion of funds and for managers taking greater risks to achieve target returns.
“Incentives in the industry were very bad. They continue to be bad today,” said Brian Singer. “Those incentives resulted in poor behavior on the part of investment managers.”
As an example, he pointed to funds that would pursue low-probability, high-risk bets like the yen-dollar carry trade. “In late 90s and earlier this decade, we had a lot of hedge fund players that didn't have skills put on these catastrophic risk trades and leveraging them. They worked until they all blew up,” Singer said.
Firms like Oaktree that distinguished themselves during the crisis have been seeing increased demand from investors.
“Successful hedge funds will be entrepreneurial; it is the essence of the craft,” said Paul Singer (no relation of Brian), founder of $15 billion Elliott Management and one of the most successful hedge fund managers of the past 30 years. “Given the typical fee structures of hedge funds, they need to do something different to make money in a consistent way.”
Even so, Leon Cooperman, head of $4 billion-plus Omega Advisors since 1991, predicts investors will come back to hedge funds but more tentatively and with a greater focus on firms that inspire confidence.
“Hedge funds will become larger, more professional. Fewer one-man and two-man shops. There's a certain scale needed,” said Cooperman, who had led Goldman Sachs Asset Management during a 25-year career at the bank. “Investors will put their money with a firm that's been around. It's all about process and controls and reputation.”
Frank Meyer, a hedge fund pioneer whose Glenwood Capital seeded hundreds of managers including Citadel Investment Group's Kenneth Griffin, observed that some of the changes investors are seeking today were commonplace at hedge funds in the seventies. Back then, short sellers were happy to discuss their positions, he said, because shares were easy to borrow and it helped to drive prices down.
“You know how they talk about increasing transparency? When I started, every manager would tell you about his portfolio,” he said. “I've been involved in hedge funds since the 1970s, and I can tell you the hedge fund industry has changed constantly - and it never repeats.”
The business is also not one that will just roll over and perish. The promise of solid returns across every markets, come rain or come shine, by managers with proven track records will be hard to resist.
That brings us back Pallotta, who even as he closed his fund told clients he would consider launching a new offering to take advantage of the bargains created by the financial crisis. He made sure to keep his management firm open and ready for whatever his next move may be.


Clic here to read the story from its source.