Billionaire investor Stanley Druckenmiller says there should only be '200 or 300' hedge funds, not thousands - and he expects a culling of the herd
- Billionaire Stanley Druckenmiller told an audience Monday night that the hedge fund industry will continue to contract and fees will continue to shrink because there are only "five to 10" people that are worth paying premium high fees for.
- Druckenmiller, who converted his hedge fund into a family office in 2010, said there should be "200 or 300" in existence.
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In Stanley Druckenmiller's mind, there's only five to 10 people who are worth the fees hedge funds charge - and the problem is that there's thousands of hedge funds run by people who aren't.
Speaking to an audience at an event Monday night at the University Club hosted by the Economic Club of New York, Druckenmiller said the industry originally had "eight to 10 savant superstars in the 70s and 80s" that charged "Rolls Royce fees" and were worth it.
The problem was thousands of imitators followed them, said Druckenmiller, who made his money betting big on currencies while working as a portfolio manager for George Soros in the 90s. He founded his own hedge fund, Duquesne Capital Management, and ran it for decades before converting to a family office in 2010.
"We need to get back to like 200 or 300" funds, he said. The more-than-$3-trillion industry currently has more than 7,000 globally according to Hedge Fund Research.
The hedge fund industry, despite a great start performance-wise to 2019, has struggled with margin pressure. Fees are dropping and fewer money managers are deciding to launch their own, while industry titans like billionaire David Tepper bow out of the space.
But Druckenmiller believes the best can still charge high fees because they have proven to be worth it. D.E. Shaw reportedly is raising fees to 3% management fees and 30% performance fees, while the industry averages drop to half of those figures.
Druckenmiller also told the audience he was skeptical of President Donald Trump's re-election chances, unless "one of the crazies" wins the Democratic nomination. He later specified Sen. Bernie Sanders and Sen. Elizabeth Warren as the two Democrats that would give Trump the best chance of winning in 2020.
Druckenmiller is a Republican and donated to former Ohio governor John Kasich before the 2016 election, not Trump, whose trade policies he repeatedly questioned Monday night. Donor records show that Druckenmiller gave more than $100,000 to Republicans for the 2018 midterms despite his disagreement with some of Trump's policies.