Everyday it seems another hedge fund is going out of business or in trouble.The volatility of 2008 is taking its toll on many funds both large and small. It is very strange. New funds cannot seem to get off the ground and some well-known established funds are closing their doors. It is the numbers – stupid.
It is bad out there. Do not be fooled by recent rallies things are tough and do not seem to be getting any better. There is some light at the end of this tunnel. The bright side is that this volatility is truly getting rid of a lot of the dead weight in the industry. It is forcing fund managers to show their investors and potential investors just how good or bad they are during tough times. It is fascinating to be observing the hedge fund business right now.
Never has it been truer to say that nobody really knows what tomorrow brings. It is after all impossible to predict the future however, there is one thing that we can predict with some certainty – that markets rise and fall. This is an undisputable fact and as such, investors and managers need to prepare for these types of environments. The reason so many funds are closing is due to their inability to deal with the volatility. These managers have truly no concept of how to manage money during tough times.
All good investors have bad times. It is the law of averages – you cannot be right 100 percent of the time. One needs to stick with the fundamentals – reread Graham and Dodd – the material works and makes sense. It is just that simple.
HedgeAnswers 2008 is right around the corner. The events are shaping up quite nicely and I look forward to seeing you at them. To register and learn more about HedgeAnswers go to www.hedgeanswers.com.