Market Shakeup

Anxious billionaires, a queasy silence on Wall Street. What's next?

It was the stock market's worst month in three years. But the events of the last few days of July felt more ominous and potentially earthshaking than that would indicate. Everybody could see the stock downturn--a couple of sharp drops followed by what looked to be directionless confusion. Yet the sharpest tremors were felt behind the scenes, in the shadowy worlds of private-equity and hedge funds.

These two sectors have grown fantastically over the past decade, and their star performers have been fantastically well rewarded. Three hedge-fund managers made more than $1 billion each last year, reports trade magazine Alpha. Private-equity...

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