The hedge fund career path used to be paved in gold: make an absurd sum on a bank prop desk, then strike out on your own with a few hundred million dollars in your knapsack, leveraged up five or six times by a kindly investment bank. The fairytale is over for the next generation of hedgies. Conditions for launch are gradually improving; some institutions say they're looking to put cash hoards to work after months of heavy withdrawals, while this week Noam Gottesman of GLG Partners, the listed London group, talked up an “opportunity-rich environment”. But as bankers sound out investors, they had better be prepared to give a lot of ground.

Anecdotal evidence suggests new funds are raising an average of about $40m this year, compared with $200m to $250m two years ago. Leverage has been tamed, to about 1.3 times on average. Fees are sinking fast. The standard 2 per cent management fee and 20 per cent performance fee of the boom became 1 and 15 last year; management fees may now be 0.5 per cent, or lower. Performance fees could be halved, and subject to hurdles over Libor and clawbacks in the event of subsequent losses. Three-month redemption terms are becoming 30 days. For portfolio managers themselves, guarantees and signing bonuses are mostly history, replaced by “ghost shares”, or cuts of future profits.

This is still a discredited industry in structural decline. Liquidations outpaced launches by 2.2:1 last year, according to Hedge Fund Research. HedgeBay data shows that discounts for offers in secondary-market hedge fund interests (excluding distressed debt) have steadily widened since August last year. The ATM effect remains undiscriminating. Relative value funds – making bets that A will outperform B, whether down or up – gained 4.5 per cent in the first quarter, says HFR; investors took out $28bn anyway, or 8 per cent of the funds' assets under management. Hey, at least rents are cheaper.