For anyone looking to make money in financial markets over the next few years, the recent activity of some leading hedge funds does not bode well.
In the second half of 2015, several prominent hedge funds went bust, retired or opted to return cash to investors and instead focus on making money for themselves, amid weak returns and declining profits, among them BlueCrest Capital Management.
And more could follow in an industry which has grown to about $3 trillion as more and more investors are lured in with the hope that Wall Street's finest can help them outperform in both rising and falling markets.
A Reuters survey of 57 hedge fund managers, executives and asset allocators from across Asia, Europe, Africa and the Americas showed nearly half thought more funds would exit the market in one form or another over the next 12 months.
A similar number of respondents said investment risks capable of scuttling a fund's performance were rising.
"There's a shake-out going on, because returns haven't been that great," said Alex Friedman, chief executive of Swiss asset manager GAM Holding, which runs funds and invests in others on behalf of a range of clients.
Data from industry tracker Eurekahedge showed just 58 percent of managers turned a profit in 2015, the worst performance since 2011, with 15 percent of managers posting losses of more than 8 percent.
Billionaire BlueCrest owner Michael Platt said in December he would close his doors to external capital and looked forward to taking on punchier bets in an effort to boost returns, free from the shackles of more risk-averse external investors.
But the recent exit by 20-year veteran investor Martin Taylor, founder of $1.5 billion equity firm, Nevsky Capital, has sparked greater consternation among hedge fund clients.
Taylor returned almost 20 percent a year over the last 15 years, achieving a total career return of 6,406 percent, compared with 200-300 percent for benchmark indices in the markets where he traded.
By any measure, a stellar performance, yet in 2014 he lost 1.4 percent and in 2015 was flat. In a recent letter to investors, he said he was bowing out as he did not expect to return to making strong returns in the immediate future.
Among the reasons: poor-quality data from countries and companies; illogical decision-making by governments; increased event risk amid illiquid markets; and the potential for index-tracking and algorithmic funds to maintain illogical trends for longer than his fund would be willing to withstand.
While he was confident conditions would improve eventually, the laws of economics were for now suspended, "and may be for some time."
The letter predicted "an indefinite period involving indeterminate levels of risk during which we think it would be wrong for us to be the stewards of your money."