THE hedge fund industry is losing its star managers but gaining an opportunity to rebuild its battered reputation. Bloomberg News reported last week that Jon Jacobson, investor and founder of Highfields Capital Management, is winding down his US$12.1 billion hedge fund after two decades. As the article noted, he joins a growing list of elite managers who have left the industry or plan to, including Richard Perry, Eric Mindich, John Griffin, Neil Chriss and Leon Cooperman. In a letter announcing his decision, Mr Jacobson bemoaned a "very treacherous investment environment". That's no exaggeration.