Much has changed in the hedge fund industry since Michael Steinhardt entered it in 1967, and not all for the good. While the founder of New York-based Steinhardt Partners doesn’t believe regulation is “constructive in any meaningful way” or that recent meltdowns pose any major risk and that the industry has an “extraordinary record,” he does express concern over some troublesome trends. In an interview with Wall Street Journal Online, Steinhardt says the move to private equity with their longer lock-up periods is a “big danger.” He recalls not having to lock up people for more than a year, and longer than that, “you are forking over a serious right” – and decries the ever-growing practice. This new trend, he says, is “an area that might require some additional regulation, in terms of reporting results and being on a level playing field,” adding that there’s a “permissiveness” in private equity that lets some HFS to “get away with being a little less than totally truthful.” An additional problem, he says, is that those hedgies who invest in p.e. have “very little experience” and as a result “probably won’t perform too well.” Inexperience, he points out, is also dogging the industry in general as there are lot of people who “do not have a history of superior performance over a long period.” A longer track record, while not foolproof, at least “gives a reasonable amount of comfort,” and said there “were a lot of young people running hedge funds whom I wouldn’t be comfortable with.”
