FAST FIVE: New Hedge Fund Formation Falls To Lowest Since 2008

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When the Fed injects liquidity into capital markets, everyone is considered a genius, but when conditions tighten, you'll “find out who's been swimming naked,” as Warren Buffet once said two decades ago.

The last time hedge fund formations were this low was 56 in the fourth quarter of 2008.  During the quarter, there were 156 hedge fund liquidations, a 24% increase over the prior quarter.

Even with firms going bust and firm formations at decade lows, hedge funds managed to outperform the broad equity indexes.  Through August, the HFRI Fund Weighted Composite Index – a global index of the world's largest hedge funds – fell about 3%, compared with a 17% plunge in the S&P500 over the same period.  Underperformance, hedge fund closures, and lack of new firm formation have occurred in a Fed-induced down cycle for markets.

Keep applying that opioid of cheap and abundant money?” Fisher told CNBC in January.  Money managers can only hope for one thing: A Fed pivot to revive markets.  This is exactly what the Powell Fed has been looking for.

22: “Job openings could come down significantly-and they need to-without as much of a an increase in unemployment as has happened in earlier historical episodes.” – Nick Timiraos (@NickTimiraos) October 4, 2022 .

Categories: ZH