Hedge funds will suffer because they won't be able to leverage investments anymore. The credit won't be available.
They will face more restrictions as part of the regulatory backlash that will be the inevitable consequence of the market turmoil over the last month. That is going to limit returns and room for maneuver, making the funds less attractive to investors.
And central banks will be so chastened by the last few months, they are unlikely to allow any bubbles to build up for a long time -- and hedge funds were good at chasing asset bubbles.
Buyout funds, likewise, relied on debt markets to finance acquisitions. Investors' appetite for the intricate financial engineering employed has vanished. Without leverage, it will be hard to make the business work. The debt markets were what buyout funds used to make their investments and then to sell them a few years later. They were the entry and exit strategies. With those doors closed, there won't be much left to do.
