Although the first half of 2011 proved promising for the hedge fund industry, the second was one of extreme difficulty, due largely to the sovereign debt crisis in the US and Europe. Continuing concerns about the economic outlook led many to predict stagnation or low growth for 2012. Yet some see an opportunity for hedge funds to take advantage of the widespread uncertainty. Meanwhile, regulation continues to tighten. Fund managers need to meet sweeping reforms head on, devoting more and more resources to regulatory and compliance matters.

Certainly there is a growing concern as to the economic outlook in comparison to what the situation had been six months ago. Interestingly, however, things have improved slightly in the last four weeks with the confidence that, while we may see a negative impact in 2012 and 2013, the economic outlook will not be as bad and uncertain as it had been in 2007.