Hedge fund dealers partied at a New York nightclub like there was no tomorrow — which for some was probably true.
Swilling martinis and vodkas, they filled Manhattan’s white, tent-themed Nikki Beach to bursting. Waiters, trays of tapas held high in the air, became stranded, wedged into crowds swaying to music under pink lights.
About 650 guests attended the event late on Wednesday, a third more than organisers expected.
Yet with hedge funds in freefall, this was more funeral wake than celebration.
“The industry is down 20 per cent. It’s by far the worst environment we’ve ever seen and we’ll see a lot of funds going out of business,” said Evan Rapoport, co-founder of HedgeCo Networks, which services hedge funds and organised the party.
The evening was billed as a networking session. Sometimes that meant angling for a particularly special deal.
“A lot of people are looking for a job,” said Nicole Alexander from Ovation Group, a corporate travel company.
“There is no stigma now because so many people have lost jobs,” she said. “The joke is that the new status symbol, instead of a Porsche or Ferrari, is having health insurance and a desk.”
A new study by Morgan Stanley predicts assets under hedge fund management globally will drop to $900 billion by the end of 2009, half the peak valuation earlier this year. And as clients run for the exits, growing numbers of hedge funds have imposed emergency blocks on the ability to withdraw money.
To admirers, hedge fund traders are risk-taking, profit-hauling buccaneers who can afford to bet big because they deal only with big players. Detractors say hedge funds embody under-regulated, over-leveraged and greed-driven business practices responsible for the US financial crisis.
Either way, the sense is that these masters of the universe, as Tom Wolfe christened traders in the novel “Bonfire of the Vanities,” won’t party much longer.
“They’re masking their fear,” said a heavy set equities broker at Nikki Beach.
“It’s been a tough year,” said Mitchel Manoff, CEO of hedge fund Corinthian Partners. “The hedge fund community says they can make money in all markets. This year, though, they haven’t.”
Of course, there are profits to make, even in hard times.
Nikhil Khandelwal, who raises money at ThornWood Capital, gleefully described his company’s ability to charge clients sharply increased interest on loans that banks now refuse. “It’s a sad reality but we make money when others lose it,” he said, not sounding sad.