Hedge funds were not in the eye of the hurricane that swept
through Wall Street last month, flattening Lehman Brothers,
nationalizing American International Group, Fannie Mae and
Freddie Mac and turning Morgan Stanley and Goldman Sachs into
banks. But the damage left in the storm's wake is likely to
batter hedge funds for some time to come.
The NYSE is bracing for a down year, as are many
Performance was already on track to make 2008 one of the worst
years in recent memory, and hedge funds had been bracing for
redemptions by hoarding cash and deleveraging. With markets so
uncertain and the government in charge amid a heavily
politicized atmosphere, funds are reluctant to step back in.
"Managers are shell-shocked right now," says one institutional
investor. "For some hedge funds, their model is going to have
to change, too, whether its return expectations or the breadth