Hedge Funds: Proceed With CautionHartford Business
Hedge fund assets in Connecticut, the sector’s third largest center in the world after New York City and London, approached $200 billion earlier this year. But market losses and withdrawals triggered by the financial crisis have whittled the industry down considerably from its $1.9 tillion peak in June – possibly by as much as 45 percent as of Dec. 31. Connecticut once had 30 hedge funds with at least $1 billion in assets, mostly clustered in Greenwich, Stamford and Westport. Their decline may accelerate in the wake of the Bernard Madoff scandal. Prosecutors say that when Madoff was arrested Dec. 11, he confessed to running a $50 billion Ponzi scheme. The biggest loser so far is the Fairfield Greenwich Capital Group, which turned an estimated $7.5 billion over to Madoff, money that is now presumed gone for good. Critics of the sector have long warned about the lack of transparency at many hedge funds, and the Madoff case is expected to spur a significant push for more regulation.
Meanwhile, Connecticut Treasurer Denise Nappier, has asked for approval to begin investing up to 8 percent of state pension assets in alternative investments, including hedge funds.
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