Byron Wien, vice chairman of Blackstone Group LP’s advisory services division, said hedge fund returns might shrink by half as firms seek to protect investors’ capital.
Returns might drop to 10% from 20% as funds lose their “zeal,” Mr. Wien told the GAIM International hedge fund conference at Monaco’s Grimaldi Forum on Tuesday.
“I’m worried that by trying to protect capital on the downside they give up too much on the upside,” he said. “The concept of hedge funds was to produce equitylike returns with bondlike volatility. The danger is we get bondlike returns with equitylike volatility.”
Hedge funds lost an average of 2.6% in May, the worst month since November 2008, according to the HFRX Global Hedge Fund index. The S&P 500 retreated 8.2%, the biggest monthly drop since February 2007.