Both billionaire hedge fund managers, and many of their peers, will be under pressure to explain to their investors how they lost so much money this year, the New York Times reported today. Few bank analysts expect stocks to perform much better next year than they did this year, when the Standard & Poor’s 500-stock index was set to end the year largely unchanged from where it began trading. The prospect that the Federal Reserve will continue raising interest rates — a step it took in December for the first time in nearly a decade — may also weigh on the markets and complicate the odds of a strong bounce-back in the new year. Steep losses this year come at a difficult time for the nearly $3 trillion industry; some pension funds have openly questioned what value hedge funds add to a portfolio in light of their hefty fee structure. Hedge funds typically charge 2 percent of assets under management and 20 percent of performance, which means that managers can still haul home multimillion-dollar paydays even when they lose money for their investors.
