Cash flow into hedge funds could dry up

The hedge fund industry could be heading for a crash similar to those experienced in 1994 and 1998, according to David Smith, chief investment director of GAM.

There are too many inexperienced hedge fund managers taking a chance in the industry and misleading investors with promises of high returns of absolute returns, said Smith. There is also a danger that an interest rate rise could catch out inexperienced managers, he added.

He likened the present situation to 1998 when the collapse of Long

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