Sunday, September 27, 2009

Hedge Funds

The Rise, Fall and Hash of Hedge Funds in the Marketplace

The field of hedge funds burgeoned during the second half of the 20th century. In the quest of quick profits, hedge funds had a penchant for piling up leverage on a massive scale.

By going out on a limb, the operators came to wield an enormous amount of influence on the marketplace. From the 1990s onward, the punters began to play a dominant role in causing or compounding one bombshell after another in the arena.

A watershed was the crash of 2008, a catastrophe of monumental scale that ripped through the financial system. The bombshell not only smashed up the capital markets but knocked out the banking system to boot. Given the penchant for leverage within the group, a direct consequence of the smash-up was the wipe-out of myriads of pools.

The debacle was a turning point for the field of hedge funds. In their current form, the agents of upheaval are unlikely to regain the ability to throw their weight around to the same extent they once did.

Certainly, there will be no shortage of leverage nor upthrows in the marketplace over the decades to come. On the other hand, the main characters in the drama are apt to differ in a variety of ways from the hedge funds of the past.

The tumultuous history of levered pools in the modern era serves as the backdrop for the current collection of articles being penned. In particular, the pieces deal with a medley of vital issues in the past, present and future of hedge funds.

More on Hedge Funds.