For Eric Mindich, the founder of hedge fund Eton Park, the investment world seemed to come relatively easily. Mindich made partner at Goldman Sachs at the age of 27, setting a record at the time. He left the big bank in 2004 and founded a hedge fund with about $3 billion in assets, itself notable as one of the largest pots for a founding in history. By 2017, though, Eton Park has run out of luck, apparently. Mindich and his fund announced that the operations will be shut down, leading many analysts to speculate about the future of the hedge fund industry and the long-term health of some of the hedge fund world's other major players.

Losses of 9% Last Year

Eton Park lost about 9% last year, bringing the fund's total assets under management to about $7 billion. While not a paltry sum by any means, this was about half of where Eton Park was when it reached a high level of assets under management in 2011. As of the end of last week, Mindich notified the fund's investors that he would be closing down operations and returning investor assets. In his letter to investors, reported on by the New York Times, Mindich indicated that challenging market conditions and lackluster performance had both contributed to the decision to shut down the firm. "A combination of industry headwinds, a difficult market environment, and, importantly, our own disappointing 2016 results have challenged our ability to continue to maintain the scale and scope we believe necessary to pursue our investment program," he wrote.

Eton Park is the first major hedge fund to close its doors so far in 2017, but it is far from the first fund to shutter because of significant losses. Bil Ackman's Pershing Square Capital Management has been in a dangerous situation since it lost $4 billion on a bad bet on pharmaceuticals company Valeant. Retirement systems funds and pension plans around the country are pulling money from hedge funds in record numbers, leaving other funds coming up short. Many hedge funds are either closing down portions of their operations or changing their fee structures. Those that have been less lucky are shutting down entirely.

Future of the Industry

Some see hedge funds as a dying breed. Traditional hedge fund models of high fees and impressive returns have faltered in recent years, as funds have struggled to exceed (or even meet) market returns. The high fees have driven away investors in search of a better deal. 2016 saw hundreds of funds close, and the number of operational hedge funds has declined to its lowest levels in five years. The future is not looking particularly bright for funds that stick to traditional models.

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