Yes, yes, we know, hedge funds are super-evil now, seriously out of favor, and their leaders subject to mob-lynchings if caught in public by any group larger than 10 (or a group of any size containing any member of Henry Waxman's staff). Despite this, conditions are ripe for a boom in hedge funds. Consider:
1. After this panicked flight to treasuries subsides, there is a lot of cash sitting around with some serious return catching up to do.
2. There's been a serious manager culling, and lots of redemptions. That money is likely to get hungry again.
3. A massive restructuring of the banking sector is killing any number of proprietary desks. There's actually a lot of talent around. To wit:
Deutsche Bank AG's co-head of global credit trading, Boaz Weinstein, is leaving Europe's largest investment bank to set up his own hedge fund following trading losses in his group at the end of last year.
The departure comes as the Frankfurt-based bank winds down its proprietary credit trading operations. Weinstein, 35, plans to take about 15 colleagues to his new fund early in the second quarter, according to Michael Golden, a company spokesman in London. Colin Fan, who co-led global credit trading with Weinstein, will assume sole responsibility for the unit.
This follows the departure of one of Paulson & Co's senior professionals to start a fund of his own. Yes, yes, ok, ok, maybe Weinstein isn't exactly "talent." Who knows.
4. No one trusts large institutions anymore. Ironically, even Made-off fit that bill. Small, dedicated capital pools with defined strategies, third party administration and even moderate track records are positioned to do very well.
5. All the really big winners in 2008 (ironically) were hedge funds. (E.g., Paulson & Co.)
You heard it here first.
Deutsche Bank's Weinstein to Leave, Start Hedge Fund [Bloomberg]