Hedge funds lose more customers and the market faces more selling


According to the FT, hedge funds bled out another $150 billion in assets in December. The paper reports "The size of the once lucrative industry has almost halved in the past year, to $1,000bn under management, according to data from TrimTabs Investment Research and Barclay Hedge."

That may be hard on the hedge funds and hard on the investors who took out much less money from the funds than they put in. It is harder on the stock market.

Both hedge funds and mutual funds have faced tens of billions of dollars in lost assets. Part of that is due to the market drop and part is due to investors who want to take their money and put it under their beds. But, for every redemption in equity funds, there is likely to be a sale of stocks from that fund. The selling, which seems to be accelerating, puts more downward pressure on the overall markets.

Many small investors have believed that hedge funds have an unfair edge. They have sophisticated traders and legions of analysts. The little guy with nothing but the stock tables can't keep up. Now the hedge funds are undermining that little guy again. They are selling into a market he keeps hoping will recover.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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