Hedgefunds losing their luster.

When most people think of hedgefunds, they think of investment vehices for affluent investors and/or institutions and the investment managers running the portfolio must be a genious to come up with a full-proof trading strategy to come up with respectable returns of around 12-20% on the average for the last several years. The market has changed the past year especially in the hedgefund industry after the downfall of Bear Stearns who provided back office support as well as funded many of the funds. With the rising credit crunch crisis, foreclosure crisis, tumbling stock prices, and and rising unemployment rates there has not been much signs of relief for many hedgefunds resulting to one of the worst years ever. Many funds have posted significant lower performances. Since most funds charge a 20% performance fee on top of the 2% management, many hedgefund managers took a huge pay cut since funds have posted their lowest performances. Since most funds have posted losses or very small returns, the 20% performance fees have not been much compensation for many hedgefund managers. Many industry experts are expecting many funds to close down, especially the smaller funds. Many investors lost their confidence and are in the process of redeeming their investments from these funds. As a result, many fund managers are forced to sell their positions to rebalance their portfolio to compensate for the increase in redemptions. This in turn will eventually force many funds, especially the smaller ones to close down. It has been a very dreadful year. However, hedgefunds were designed for affluent investors to risk adverse against the market in the down market. Apparently, this has not been the case. The rapid deceleration of the market forced many hedgefunds to lose their luster.