Reuters – Hedge fund blowups often prompt people to select these lightly regulated portfolios with more care, but the warnings often wear off fast, leaving many vulnerable to the next disaster,analysts and investors said.
Last week the $1.2 trillion industry buzzed with news that New York-based MotherRock, a roughly $500 million fund run by former NYMEX president Robert “Bo” Collins, collapsed on natural gas bets.
Earlier this year, Atlanta-based manager Kirk Wright’s investors charged he cheated them out of at least $100 million. Last year Bayou Group went out of business after having lost an estimated $450 million in a long-running, complicated fraud.
“Concerns about good governance at hedge funds come and go in waves,” said Bradley Ziff, head of the hedge fund advisory practice at consulting group Mercer Oliver Wyman. “Right now there are probably thousands of copies of the MotherRock story circulating and they will be looked at carefully. But over time, they will be ignored,” he said.
Hedge funds often promise to make money in all markets and industry assets have doubled in the last three years as pension funds are now joining rich investors, long hedge funds’ target clientele.
