The world’s hedge funds, asset managers with $2.9 trillion, are at risk of losing a quarter of these funds in the coming year amid deteriorating its performance, said in an interview with Bloomberg, the President of investment group Blackstone Tony James.
“There will come a day of reckoning. The industry will be reduced, and this reduction will be painful — very painful for many segments,” he warned.
In April, the head of hedge Fund Third Point Daniel Loeb stated that the industry has come to the stage of “collapse” after the “disastrous” results this year.
According to Reuters, last year hedge funds lost an average 1% profit. In 2015 closed 979 hedge funds — more than ever since 2009. Beginning 2016, the year the industry ended with the worst for the year indicators and collided with the maximum outflow of investment since the financial crisis. The HFRX global index, calculated by Hedge Fund Research company, as of may 24, declined from the beginning of the year by 1.6%.
According to the company, in January-March net outflow of funds reached a record over the seven years of almost $16 billion: $7.3 billion lost funds that focus on making a profit from large economic and political changes in various countries, another $8.3 billion — funds based on the strategy of “behaviors”. Over the past two quarters, investors withdrew $16.6 billion.
Investors are unable to respond to sharp fluctuations in global stock markets. In addition, they do not accept too high a Commission, which, in the opinion of investors, asset managers charge for their services. Managers of hedge funds — one of the most highly paid in the financial sector: their Commission is usually 2% of assets under management and 20% of the profits from investments. Such amounts, according to the head of Blackstone, “these days ill founded”. Previously Warren Buffett called these volumes “outrageous”, and bill gross from Janus Capital Group — “fabulous fraud”. In 2015, the most highly paid managers of hedge funds earned a total of $13 billion — 10% higher than the previous year. The five of them annual remuneration exceeded $1 billion As noted in an interview with Reuters corporate investor Michael Peltz, compensation for last year was a record, “despite the fact that about half of all hedge funds last year lost money.”
On the performance of hedge funds also had a negative impact measures of Central Banks to stimulate the financial system, the decline in trading volumes and the volatility of the markets. According to James, the weak global indicators remain a cause for concern. In his opinion, they are due to the fact that funds are hedging risks in conditions of high volatility. “Within a short period, they will benefit from this, but with further growth of prices on the market it will lead to the decline,” he warns.
Blackstone is one of the world’s largest investment groups of companies: in the first quarter of 2016, she managed assets totaling $344 billion. Blackstone Alternative Asset Management is the largest Manager of hedge funds: the company is buying shares of their share capital and provides seed capital to managers. According to James, the indicators in this area are superior to the average for the industry. In January-March, Blackstone Alternative Asset Management managed assets with a total value of $68.5 billion (against us $66,4 a year earlier). This business brought the group $244 million of economic income, which is 35% lower compared to the same period last year.