Credibility Shaken, Hedge Funds Are Punished by Investors

Now for a bit of good news: Rationality may be breaking out in the hedge fund world. Investors are punishing funds that have engaged in questionable behavior and balking at ever-escalating fees. Regulators are showing uncharacteristic backbone, insisting that they will not merely fight the last war when it comes to new rules. That’s a big change from the old way of doing business in hedge fund land, which was to reward failure and ignore problems. Think back to Long-Term Capital Management. The multibillion-dollar hedge fund imploded spectacularly in 1998, presaging much of the larger financial crisis a decade later....