The global financial crisis will reduce the hedge fund industry to just a third of its current size, predicts American billionaire investor George Soros.
"The hedge fund industry is undergoing fundamental changes," said Soros, one of the first and still one of the most well-known hedge fund managers in the world, in a speech at the renowned Massachusetts Institute of Technology (MIT)."According to my estimates, this industry will be reduced to between half and a third of its current value," he said, without specifying whether he was referring to the number of funds or the amount of money they manage.
Many wealthy investors who have been spurred by the doubling of hedge fund industry assets to around $1.9 trillion over the past three years through about 10,000 existing relatively poorly regulated funds worldwide have begun to slowly withdraw their funds for fear of the collapse of that industry. Regulators should monitor credit markets to stabilize the economy, which will make some aspects of the financial services sector less profitable, Soros said, one of the first to warn of the seriousness of the ongoing financial crisis.
"Loans must be regulated just like money, and indeed stricter regulation is needed," Soros said. "Undoubtedly, financial business will no longer be as profitable as it has been over the past 25 years." In recent years, companies in that sector have accounted for as much as 40 percent of U.S. corporate profits, he added. "However, that was an excess that will not be repeated. Regulation will certainly make some of them unprofitable." The International Monetary Fund (IMF) must protect emerging markets – otherwise, today's global financial system will not survive for long, Soros concluded. (H)
