Every minute you look up, another hedge fund is in meltdown, rumored to be in meltdown, rumored to be in meltdown right before melting down, denying it is in meltdown, right before melting down, or is just simply melting down with no warning at all. I suppose at some point emerging markets funds were going to have to start popping their rivets in greater numbers, and that point seems upon us.
We aren't totally unsympathetic to hedge funds that are in the process of losing their shirts. But when you invest in emerging markets, perspective is important. No one who spends most of their time in New York (or Stamford) can really connect with a culture whose mobsters (and really, what is closer to a true market economy than the black market) cannot fail to have the obligatory black Mercedes inscribed on their tombstones. Absorb that. Now, tell me that you understand this economy well enough to deploy capital there.
Hedge funds focusing on emerging markets have lost 22 percent on average this year, according to data compiled by Hedge Fund Research Inc. Emerging-market stocks and bonds have fallen, led by China, Russia and Brazil, as commodity prices plunged and investors shunned riskier assets on concern the global economy is entering a recession. The MSCI Emerging Markets Index has plunged 54 percent this year.