What will happen on the buy-side?

[echostate]

Recently a lot of people are discussing GS/MS as a commercial bank and one of the possible result is the restriction on leverage. Then what happen is: less profit due to low leverage --> less bonus for everyone.

But what will happen on buy-side firms such as hedge funds?

 

[Andy Nguyen]

Until there is new regulation governing hedge fund section, life goes on. If anything, hedge fund seems more attractive than ever now that all the "prestigious" investment banks are gone or/and under strict bank regulation.
I think many people will move out to open their fund or more receptive to hedge fund now.

 

[pardasani]

Another point is that in the big picture, hedge funds still are not the biggest chunk of the buy side per say. The total Hedge fund industry has about $1.5 trillion assets under management. Even the biggest names do not cross the $50billion mark ( Renaissance ~ 35b D E Shaw ~35b,Citadel ~20b, SAC ~ 20b). Compare that with the " traditional/ conservative" places like BGI (~1.8 Trillion), State Street (~1.5 Trillion), Fidelity (1.5 Trillion) or Blackrock (1.2 Trillion)

While many buy side firms have taken loses, the income at the more traditional shops is a function of asset under management -- a metric that is relatively more stable.

 

[Stefan Zota]

Yes, hedge funds that survived the crisis will thrive for next couple of years.
They will attract more cash since the options are reduced. They can also hire competitive employees from IB ranks easier.

Also, I believe that many hedge fund strategies will work just fine going forward (e.g. volatility, statistical arbitrage, long-short etc)

 

[echostate]

Another point is that in the big picture, hedge funds still are not the biggest chunk of the buy side per say. The total Hedge fund industry has about $1.5 trillion assets under management. Even the biggest names do not cross the $50billion mark ( Renaissance ~ 35b D E Shaw ~35b,Citadel ~20b, SAC ~ 20b). Compare that with the " traditional/ conservative" places like BGI (~1.8 Trillion), State Street (~1.5 Trillion), Fidelity (1.5 Trillion) or Blackrock (1.2 Trillion)

While many buy side firms have taken loses, the income at the more traditional shops is a function of asset under management -- a metric that is relatively more stable.

Thanks. What is the difference between hedge funds and those traditional/conservative shops? Especially in terms of quant skills they use. Or .... traditional shops such as blackrock/BGI don't use quantitative staff ...?