Hedge Fund Stars Crying Uncle Gives Industry Hope

The hedge fund industry is losing its star managers but gaining an opportunity to rebuild its battered reputation.

Bloomberg News reported last week that Jon Jacobson, investor and founder of Highfields Capital Management, is winding down his $12.1 billion hedge fund after two decades. As the article noted, he joins a growing list of elite managers who have left the industry or plan to, including Richard Perry, Eric Mindich, John Griffin, Neil Chriss and Leon Cooperman.    

In a letter announcing his decision, Jacobson bemoaned a “very treacherous investment environment.” That’s no exaggeration.  

A combination of lethal forces has hit hedge funds in recent years. One is a raging U.S. bull market. Jacobson’s fund has been flat since 2017, while the S&P 500 Index was up 35 percent over that time through September, including dividends.

Granted, an investment in hedge funds isn’t the same as buying the broad stock market. But as I noted recently, that doesn’t stop many U.S. investors from comparing every investment with the S&P 500. And by that yardstick, few investments measure up over the last decade. Foreign stocks, bonds, private equity, venture capital, real estate and, yes, hedge funds have all lagged.

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