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The Turner Review: Time to work for tiny hedge funds

Lord Turner’s review of financial services regulation is another nail in the coffin for banks’ prop desks, and quite possibly for larger hedge funds.

Turner is calling for UK banks, UK subsidiaries of international banks, and hedge funds which have become ‘bank-like in nature or systemic in importance,’ to substantially increase the amount of capital they hold, and to triple the amount of capital they hold against trading books.

According to the latest missive from the CEBR this will result in up to 50,000 job losses in the City in years to come.

Traders seeking to escape the regulatory thrall may well be expected to congregate in small non-systemically significant firms falling below the FSA’s radar. According to hedge fund blogger Fintag, prime brokers and custodians are already noticing a proliferation of one man bands.

Working for a tiny hedge fund has its disadvantages though, not least the fact that many are expected to go out of business before the year’s out.

“From the point of view of governance, due diligence, independence and administration, investors now want hedge funds to be large,” says John Godden, founder of hedge fund consultants IGS Group.

“There were 20,000 hedge funds in the world and by the end of the year there will be around ten thousand,” he adds. “If someone came to me and said they wanted to set up a small fund with a single manager I’d advise them to join a larger player. Investors just aren’t into it.”

Comments (4)

  1. Age of the rock star hedge fund is upon us? Less Man Group more, Hugh Hendry and his gang?

  2. I used to a hedge fund out of my living room in 2005. Sweetest gig i ever had. If a larger fund would like to outsource my talent then i’m happy to go back to my 2005 business model.

  3. Funnily enough I also run a hedge fund out of my living room. Please get in touch with me if anyone is interested.

    Michaelson Ponzi Capital Partners LLC

    AUM: $500mln

    Average Annualised return: 17%

    Sharpe Ratio: 13.0

    Investment Manager: _____

    Relevant experience: Negligible

    Style/ Investment Strategy: A.P. Capital Partners intends to leverage on opportunities where high net worth individuals, fund of funds, and every day joes are willing to buy into something that sounds too good to be true, without asking too many questions. We deploy several “stress free” trading strategies with investor capital, whereby I put your money into my bank account in Switzerland, and relax.

    The minimum investment is only a fiver, so don’t worry if you’re a bit short.

    The Big Kahuna Reply
  4. I am searching for senior portfolio management or other senior investment management positions In global asset management or portfolio management in the hedge fund industry or other investment industry sectors that are relevant to my 20+ years of experience as hedge fund senior portfolio manager/managing director & co-founder & chief investment officer of US SEC registered investment management company/senior portfolio manager for global tactical asset allocation strategy/derivatives manager/ investment strategy & product development/financial modeler for utilising various quantitative strategies including statistical arbitrage and other market neutral strategies. I am very flexible as to preferable locations – Asia, Europe, UK, UAE, Bahamas, etc.

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