By Sarah Wood
Normally, a little turmoil is great news for hedge funds.
After all, the industry enjoys an inherent flexibility not
available to most other investors when it comes to profiting
from market dislocations.
But the events that have been keeping many managers in
sticky Midtown Manhattan on recent Fridays instead of taking
early helicopter flights out to their breezy Hamptons retreats
constitute more than a little turmoil. In recent days, one
executive at a $20 billion-plus hedge fund that lived through
1998 put the odds of a similar market meltdown this year at an
unnerving 50/50. Some invoke 1987. What's certain is that the
collapse of Jeff Larson's Sowood Alpha Funds and some Bear
Stearns' structured credit vehicles are just the beginning.
But who will survive - and prosper most - if the turmoil
unleashed by the subprime mortgage debacle spreads and the
markets turn deeply bearish and volatile?