In spite of their famed repute for rewarding investors with stellar gains, more and more hedge funds are tanking—and increasingly are closing shop, The Wall Street Journal reports. The burgeoning number of hedge funds has led to portfolio managers all chasing the same ideas, leading to slimmer profits and bigger market swings.
So far this year, hedge funds are up 6.9%, compared to returns of 31.2% in 1999, according to Hedge Fund Research.
Vega Asset Management, for one, has lost 75% of its value in the past two years and now has only $3 billion under management.
Though Vega has no plans to close shop, 1,000 hedge funds have shut their doors in the past two years, and industry insiders are calling this the first wave of consolidation.
“The number of hedge funds will go down as there is consolidation among players in the industry and some funds go out of business,” said Jamie Dimon, chief executive of JPMorgan Chase, which has a majority stake in hedge fund Highbridge Capital Management.