A pivotal year for hedge funds?

Thu Apr 23, 2009



Tom Brown, head of investment management and funds, KPMG Europe

2008 proved to be one of the most difficult years on record for hedge funds with the average fund returning -16.5% over the year, according to HedgeFund Intelligence (HFI) data. To put this into context, the return is significantly better than most other asset classes, including equities, which nearly halved in value. However, hedge funds have not provided the level of capital protection and absolute returns that many investors thought they were going to achieve – given their managers’ objectives and past performance. Consequently, many hedge funds are now facing the prospect of being well below their high water marks at the same time as many investors are calling for a reduction in fees so that managers share the investors’ pain.

Before we consider the potential impact on hedge fund terms and the broader industry, it is...

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