Fischer’s lament and ones like it are echoing through the industry. It’s an existential crisis for former masters of the universe who once prided themselves on their trading prowess. Now they’re questioning their wisdom and their ability to generate profits that made them among the richest in finance.
The $2.9 trillion industry has posted average annual returns of 2 percent over the past three years, well below those of most index funds, according to data compiled by Bloomberg. That meager performance and complaints about high fees from pension plans and other investors led to $51.5 billion being withdrawn from hedge funds in the first nine months of the year, the most since the financial crisis, data compiled by Hedge Fund Research Inc. show. About 530 funds were liquidated in the first half, on pace for the most shutdowns since 2008.
...Algorithms and exchange-traded funds have exacerbated price movements and driven industry stocks in unison, undermining wagers on single companies,...
...“There was a playbook based on logic that worked most of the time before 2008,” he says, twisting the cap off a bottle of peach-flavored Snapple. “But the game has changed and logical investors haven’t got the new playbook figured out yet.”...
...computer-driven markets were incompatible with the way they trade....
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