IGS Group's CEO John Godden, who advises hedge funds on raising
money,
told Bloomberg that the industry will see that level of severe shrinkage as
hedge funds either fail from losses and redemptions or merge in order
to save themselves by combining assets under management.
Hedge funds have racked up huge losses this year, ravaged by bear
markets in both debt and equity, which have set off a tidal wave of
redemptions by their investors. In October alone, the industry was
slammed by roughly $100 billion in withdrawals, and earlier this year
hedge fund legend George Soros said that the industry is being crushed,
telling Congress at the time that "the bubble has now burst, and hedge
funds will be decimated. I would guess that the amount of money they
manage will shrink by between 50% and 75%."
And if hedge fund managers didn't have enough trouble, Bernard Madoff's $50 billion Ponzi scheme is sure to prompt even more jittery investors to withdraw funds, while also hurting the ability of managers to lure new investors into their funds. -
George White
See Bloomberg story
See Dealscape post on hedge fund redemptions
Only three more weeks to go until hedge funds can close the book on the worst year in the $1.5 trillion industry's history. Unfortunately the pain promises to continue well into 2009, with some predicting that at least 30% of hedge funds will disappear. 
