Is this the last hurrah for hedge funds?

I still strongly suspect that hedge funds (as well as proprietary trading at in-house trading desks at major banks) is the core cause of a lot of the current market turmoil and volatility, but I now also suspect that their days are numbered. Many hedge funds have had quite poor returns over the past year and are at risk for doing poorly over the next year as well. There have been numerous reports of many hedge funds facing redemption requests from their investors and a lot of that money may not come back any time soon. It remains to be seen how many of those rumors are true. I strongly suspect that as investors gradually begin to more fully assess risk, they may find that the risk-adjusted returns for hedge funds are simply not compelling, or at least nowhere near as compelling as they appeared several years ago.

To be sure, hedge funds will continue to exist in the coming years, but their ability to drive the Dow down 700 points in a single day will likely wane in the coming months. Meanwhile, hedge funds (as well as proprietary trading at in-house trading desks at major banks) will likley continue to be very dangerous snakes.

-- Jack Krupansky