Stop me if you’ve heard this one before: The hedge fund industry has put in safeguards to make sure the next crisis is nowhere near as bad as the last.
That’s the case being made by Don Steinbrugge, managing partner at Agecroft Partners, a consulting firm that works with hedge funds and firms that specialize in alternative investments.
In rejecting assertions that the bonanza of zero interest rates and trillions in Federal Reserve money-printing has created an asset bubble, Steinbrugge argues that the hedge industry is far more stable than it was in 2008. That was when firms making bets in subprime mortgages and other high-risk areas of debt nearly collapsed the global financial system and themselves lost about $1.1 trillion, according to recent estimates.
He makes five points to bolster his argument that should markets get rocked like they did then — stock indexes lost about 60 percent of their value — hedge funds are better positioned to withstand the shock:
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