Number of hedge funds shrinking
Number of funds falls as credit crunch takes toll, HFR says
5:47p ET September 18, 2008 (MarketWatch)
SAN FRANCISCO (MarketWatch) - The number of hedge funds is falling as the credit crunch takes a toll on the $2 trillion industry, Hedge Fund Research said on Thursday.
A total of 147 new single-manager funds were launched in the second quarter, while 157 were liquidated. That brought down the total number of funds for a second quarter in a row - the first time that's happened since HFR began tracking the industry more than a decade ago.
That doesn't include funds of hedge funds, which allocate investors' money to a range of underlying managers.
For the industry as a whole, 350 hedge funds shut down during the first half of this year. At the current rate, that would mean 700 liquidations by the end of 2008, up 24% versus 2007, HFR said.
Meanwhile, fewer than 500 new funds were launched during the first half. If that pace continues, it would result in the lowest number of new fund introductions since 2001, in the midst of the dot-com bust, HFR reported.
During the first eight months of this year, hedge funds generated their worst performance since indexes were first compiled to track industry returns in the late 1980s. That may be reducing investor demand.
"The environment of the last 12 months has been characterized by volatility, performance dispersion and asset consolidation toward the largest hedge fund firms," said Kenneth Heinz, president of HFR. "In the last 12 months, the top decile of funds has outperformed the bottom decile by over 75%, the widest spread on record and a trend which is expected to continue. |
