Hedge fund closures exceed launches for first time since 2008

Mixed graph colourThe number of hedge fund closures exceeded the number of launches for the first time since 2008 this year, according to the Eurekahedge Report for July.

Hedge funds have been closing at high levels since the second half of 2011 and throughout 2012.

The rate of closures outweighs an uptick in launches in the first quarter.

Since the start of the year, 300 hedge funds have been launched. At the end of May, there were 10,431 hedge funds on the market.

Having analysed the lifespan distributions of both active and obsolete hedge funds listed in its database, Eurekahedge says that active funds have a median track record of 5.7 years while obsolete funds lasted 3.81 years before shutting down.

Nearly 20% of active managers have more than 10 years of returns and 1.8% of the population have survived through bull and bear markets for over 20 years.

“Having a long track record does not guarantee the perpetual survival of the hedge fund as quite a significant number of obsolete funds have more than 10 years of returns before closing the business,” the report notes.

The largest quarterly attrition rate was recorded in the last quarter of 2008 as the collapse of Lehman Brothers and the market turmoil that ensued brought with it a high number of fund closures.

Eurekahedge says the economic recovery in subsequent years led to a steady increase in the number of launches. The popularity of the Ucits structure brought many launches of Ucits-compliant funds to satisfy investor demands.

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