A Hedge Fund Exit Interview
Post on: 29 Август, 2015 No Comment
By Joe Nocera May 15, 2009 4:17 pm May 15, 2009 4:17 pm
My column this week is an interview with Neil Barsky, who spent the last 11-plus years running a hedge fund, and is getting out of the business. As I note in the column, he is blunt, funny and straightforward, and Ive always enjoyed talking to him. Below is a short excerpt from my interview with him (or more precisely, my notes of my interview with him):
Certain things will change. Leverage will change. Regulation will change for how much Wall Street can borrow, which will dampen it. The administration has to decide how punitive it wants to be to the financial world. We need a banking system. We need banks to lend. There is no question that the administration is on the right track in wanting to stabilize the banking system. Even holding their noses a little.
On the other hand, how do we make sure this doesn’t happen again, and that we reduce this asymmetric risk?
The reason that is not the case for hedge funds is that fund managers have their own money in the fund. I had 90 percent of my net worth in the fund. People knew that and trusted it.
I believe when the tide goes out people will find that hedge funds by and large did their job. They protected capital far better than the market did over all. If you happen to believe that the market will be flat for the next five years, as I do, I would rather have my money with hedge funds than mutual funds, which is much more corrupt industry because they are asset gatherers without skin in the game trying to beat a meaningless index. Hedge funds didn’t take TARP money. Hedge funds were not the problem. It was the deregulation of the banking industry that allowed them to take risk that was so mind-boggling. Everybody remembered Long-Term Capital Management as the problem. The industry will shrink, but it will still exist. And compensation might go down. But there will always be extraordinary opportunities for wealth.
I don’t think what is happening in hedge funds any different from private equity. It will shrink. It will be less profitable. But because leverage will go down globally, there will be less capital in all forms. You could make an argument that everything will be down 50%. So: c’est la vie.
As always, I welcome your comments, which you can leave below.
