Record Number of Hedge Funds Liquidate in 2008
More than 775 funds liquidated in the fourth quarter,
nearly 15 percent of funds closed in 2008
New fund launches lowest since 2000
Hedge fund industry consolidation continued through the end of 2008, with a record number of hedge funds liquidating in the fourth quarter, according to data released today by Hedge Fund Research, Inc. (HFR), a leading hedge fund data provider.
Reflecting record investor withdrawals of over $150 billion in Q4, 778 funds liquidated during the period, more than doubling the previous quarterly record of 344, set just one quarter earlier in 3Q08. The total number of liquidations in 2008 was 1,471, an increase of over 70 percent from the previous full year record of 848 liquidations set in 2005.
The fourth quarter also saw a sharp drop in the number of new funds launched, with only 56 launches for the quarter versus 117 funds launches in 3Q08, although 659 funds launched over the calendar year. The launch total for the full year was the lowest since 2000, when 328 funds launched.
A full analysis of 2008 hedge fund launches and liquidations is included in the HFR Market Microstructure Industry Report: Year End 2008. Among other topics of note:
2008 was a record year for performance dispersion across the hedge fund industry, with nearly 100 percentage points separating the top decile of performers from the bottom decile;
Despite substantial transition across the brokerage industry, the top three prime brokerage firms continue to control more than 62 percent of all industry capital;
More than 275 Funds of Hedge Funds were liquidated in 2008, also a record;
On a net basis, the total number of hedge funds declined by about eight percent in 2008, to 9,284.
“After years of steady growth, 2008 was a record year for hedge fund liquidations, reflecting in part the transitions occurring across many aspects of the overall financial industry, as well as the substantial performance dispersion between hedge funds,” said Kenneth J. Heinz, president of Hedge Fund Research. “As the industry evolves to suit investor demand, trends in strategy preferences, service providers, disclosure and transparency are likely to shape the industry landscape for the foreseeable future.”
