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Leon Cooperman Thinks The Hedge Fund Industry Is Under Attack

Leon Cooperman Thinks The Hedge Fund Industry Is Under Attack

Hedge fund titan and CEO of Omega Advisors, Leon Cooperman, is concerned about the hedge fund industry's current environment. He is quoted as having warned, "The hedge-fund model is under challenge. It's under assault," according to a report on the Wall Street Journal.

The report said Cooperman was even considering whether it was worth running hedge funds at all. The report recalled the March announcement from Omega Advisors that "U.S. regulators intend to recommend civil charges against the firm for alleged violations of securities law."

Cooperman has denied any misconduct, saying he "would defend himself and the firm."

Many investors are withdrawing money from the hedge funds, as the tepid market environment makes it tough for them to deliver desired returns that don't commensurate with the high service fees charged.

Related Link: Is The Hedge Fund Industry's "Midas Touch" Dwindling?

The WSJ report said hedge funds typically charge higher fees than other money managers, usually 2 percent of assets under management and 20 percent of profits.

"[F]ees are too high. I'm surprised they've stayed this high for this long," the report said quoting James Chanos, a prominent manager.

Meanwhile, the report added that big investors are pulling money from hedge-fund bets and investing into other non-traditional assets such as private equity, real estate, toll roads and bridges.

"Others are migrating to cheaper alternatives that mimic the strategies of hedge funds but at significantly lower cost," the report highlighted.

"Total global hedge fund capital declined to $2.86 trillion in the first quarter, including investor outflows of $15.1 billion marking not only the largest quarterly outflow since the second quarter of 2009, but also the first consecutive quarters of outflows since 2009," according to a press release from Hedge Fund Research.


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