It appears that stars of the hedge fund world, such as Cohen, Einhorn, and Signer are not having any problem raising money at a time when other funds are seeing mass redemption (see Bloomberg article). For established managers, there are a couple of intriguing reasons to raise money at this time. For one, equity prices are depressed, creating opportunity for managers with capital on hand. In addition, the recent sell-off has placed existing clients significantly under their high-water marks, meaning that it may be a while before managers can capture the normal 20% of future profits. New money, on the other hand, is starting fresh, allowing future profits to generate normal fees right away. Apparently, reputation and performance do still matter. Then again, in a down market, performance is all relative. As one person on CNBC was recently quoted as saying "small losses are the new gains." Only during a bear market, and only on Wall Street, would such a statement make any sense.

It appears that one potential opportunity has presented itself as a result of the ongoing credit crisis. Many larger investors investors who qualify for hedge fund investment, but who have previously been shut out due to their fund of choice being closed, may now have their opening (see Reuters article). Mass redemption are causing funds that previously closed their doors to open them back up. Of course, for many hedge funds this would still require you to have up to half a million dollars, and also nerves of steel given the daily developments in the market. While at a loss, hedge funds on average are still "only" down 9.41 percent, compared to the 30 percent drop in the DJIA over the same time frame. Yet a loss is a loss. Of course, even if you feel that the market has bottomed and decide to park your money in a hedge fund, the fund may not put your funds to work right away given that money is still being kept on the sidelines in order to deal with future redemption. Furthermore, while long-term investors should be rewarded, there is always a worry that hedge funds that continue to see larger losses and redemption may also force them to close-up shop and start new if current performance takes them too far away from any internal high water marks that are necessary to once again start taking performance fees. While the dawn does come after the darkest part of the day, it may unfortunately still be too soon to know how late it is in the evening.