2010 bets by hedge fund managers: crisis

Are hedge funds worthwhile?

But the lackluster performance has other people wondering: are hedge funds worthwhile? The high fees and muted returns — and a long-running federal investigation into insider trading in the industry — has cast a cloud over a business that long defined Wall Street wealth.

Ridiculous fees for single-digit returns ?

“A client told me the other day that paying these ridiculous fees for single-digit returns, then worrying about these investigations — it’s just not worth it,” said Bradley H. Alford, chief investment officer at Alpha Capital Management, which invests in hedge funds. “A lot of these things you can sweep under the rug when there are double-digit returns, but in this environment it’s tougher.”

2010 bets by hedge fund managers: crisis

This year, bets by hedge fund managers were whipsawed by the stock market “flash crash” in May; the European debt crisis; frustration with the Obama administration over what many in the business viewed as anti-Wall Street rhetoric; and the Federal Reserve’s unusual strategy of buying bonds in the open market to hold down interest rates.

Insider trading investigation

There are still many hurdles for the industry to clear, including the insider trading investigation, lingering difficulty in raising money, and the liquidity demands from investors still fuming over lockups in 2008 that denied them access to their cash.

Harbinger Capital run by Falcone -14%

Some hedge fund notables will probably remember 2010 as a year they would like to write off. For instance, Harbinger Capital, run by Philip A. Falcone, was down 13.8 percent at the end of November, according to HSBC’s data.

Greenlight Capital 11% return

David Einhorn notched a 10.5 percent return at his Greenlight Capital hedge fund through November, raising the fund’s total to $6.8 billion.

Paulson’s Advantage Plus 14% up

As recently as the end of September, Mr. Paulson’s flagship Advantage Plus fund was down 11 percent. As of last week, the fund was up more than 14 percent for the year. (His clients are mostly institutions that invest a minimum of $10 million in the fund.)

source: dealbook.nytimes.com