Half of all hedge funds may vanish over the next five years as a result of declines in the credit market, says Jeremy Grantham. Coming from the chairman of Boston-based Grantham, May, Van Otterloo & Co., which manages more than $150 billion, such a prediction may have a certain gravitas. In an interview with Bloomberg News, Grantham said, “Probably the most stretched silly credit that ever walked the face of the earth was subprime, and that was the start of it. And then you started to see more of the fixed-income market getting contagion.” He accused hedge funds of “piling on risk of different kinds and presenting as outperformance,” adding that “In a weak world, they pay the price of all the risk they’ve taken.” And then melt down. As investors continue to lose their appetite for risk, the famously pessimistic money manager said, changing sentiment will claim the life of at least one global bank and “one or two” private equity firms. Grantham projected that high levels of leverage will cause p.e investors to lose most of their money, while a couple of “very large” firms – though he didn’t mention names would likely collapse from their debt burden. Meanwhile, despite his generally bearish outlook, Grantham said he is still bullish on emerging markets, and in fact one of his GMO Emerging Markets Fund has soared 51% this year, but even about that he says, “it won’t stay like this forever.”