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Economist Roubini Predicts Hedge Fund Failures, Panic, Closed Markets
Tom Cahill and Alexis Xydias
October 23, 2008
Hedge funds closures will eliminate about 30 percent of the industry, and policy makers may need to shut markets for a week or more to stem panic, according to presentations at an investor conference today in London.
“In a fairly Darwinian manner, many hedge funds will simply disappear,” Emmanuel Roman, co-chief executive officer at GLG Partners Inc., told the Hedge 2008 conference in London. U.S. regulators will “find a way to force regulation,” said Roman, 45, who runs New York-based GLG with Noam Gottesman, 47. The firm was founded 13 years ago as a unit of Lehman Brothers Holdings Inc. and now manages about $24 billion in assets.
Nouriel Roubini, the New York University Professor who spoke at the same conference, said hundreds of hedge funds will fail as the crisis forces investors to dump assets. “We’ve reached a situation of sheer panic,” said Roubini, who predicted the financial crisis in 2006. “Don’t be surprised if policy makers need to close down markets for a week or two in coming days.”
Many hedge funds have resisted oversight by the U.S. Securities and Exchange Commission, even as policy makers coordinated global interest-rate cuts and bailed out banks this month to try and stem the crisis. The hedge fund industry is stumbling through its worst year in two decades and posted its biggest monthly drop for a decade in September.
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