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What would happen if the drawdown experienced in the first half of March 2026 turned into a prolonged sell off for the hedge fund industry. Would it be like 2008? Most unlikely, argues Donald A. Steinbrugge, CEO of consulting firm Agecroft Partners in his latest article, as the crisis has polished the industry into resilience:
As the hedge fund industry hovers near an all-time high of roughly $5 trillion in assets, up from about $600 billion at the turn of the century, it has recently experienced a moderate drawdown across most strategies in the first half of March 2026. Many investors view this as a temporary setback driven by volatility linked to the Iran war. However, if this is not a short-lived disruption, and losses deepen into sustained double-digit declines, will the implications for the industry resemble those experienced during the 2008 financial crisis? During that period, widespread drawdowns triggered investor redemptions, which in turn amplified losses in less liquid strategies and created a negative feedback loop between performance and capital flows.
The industry has evolved meaningfully since 2008, leaving it better positioned to navigate periods of market stress. The following structural changes have made a similar unravelling less likely:
Performance: Expectations vs. reality
Prior to 2009, many hedge funds and fund-of-funds marketed their strategies as delivering absolute returns, often targeting benchmarks such as T-bill...................... To view our full article Click here
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