The hedge fund business used to be a no-brainer for big banks like Citigroup, Bear Stearns (now part of J.P. Morgan), Goldman Sachs and UBS AG because money was pouring into the industry and there were no doubts on their continued growth. But with the credit crunch recently, all of these banks have run into problems with their hedge funds and their management and involvement in these funds are raising questions.
Some are now wondering whether top-performing hedge funds can succeed within a big bank, especially those with an entrepreneurial streak and require more flexibility.
Hedge fund lawsuits being brought against banks like Citigroup for the meltdown of the Falcon, ASTA and MAT funds are also questioning whether the cons of the hedge fund game outweigh the potential gains; when a hedge fund collapses, there isn’t much investors can do about it except sue. The big banks should be expecting to be the targets of more lawsuits that will cost them in terms of money and client relationships.
Here’s a sampling of the hedge fund failings so far:
Recently, Citigroup's Falcon, ASTA and MAT funds racked up almost $2 billion in losses
Bear Stearns’ mortgage funds lost almost $2 billion last year
UBS's Dillon Reed fund was closed after losses in the summer
Goldman Sachs's Global Alpha fund lost almost $4 billion in 2007 and J.P. Morgan’s Highbridge Capital Management has produced disappointing returns in several of its funds in the past couple of years, including its flagship multi-strategy fund. However, both have improved returns this year and are making money.
No comments:
Post a Comment