Hedge fund liquidations stubbornly at record highs

Liquidation increasesHedge fund liquidations totaled 272 for the first quarter of this year, the second-highest quarterly liquidation total since 2009.

In the previous quarter, 296 hedge funds were liquidated, data from Hedge Fund Research shows.

Meanwhile, increased investor interest in equity hedge and event-driven strategies propelled the number of hedge fund launches to 289 in the first quarter of this year, up from 244 in the previous quarter.

Total hedge fund capital globally now stands at $2.7 trillion (€2 trillion).

Performance dispersion has narrowed across the industry: the top-decile of hedge funds, as gauged by the HFRI Fund Weighted Composite Index, show lower returns while the returns of bottom-decile hedge funds remained unchanged.

The top decile of HFRI constituents gained 33.4% in the trailing 12 months ending the first quarter, a decline from the 41.6% gain in 2013.

The bottom decile of HFRI constituents declined 18.3% over the same period, a slight improvement from the 18.9% loss in 2013.

Average management fees across the entire hedge fund industry declined by two basis points while average incentive fees fell 28 basis points to 17.99%.

Hedge fund fees are coming under more scrutiny and a recent poll by Deutsche Bank found that investors have little tolerance for extra expenses.

Deutsche Bank, which surveyed 70 investors with a combined hedge fund allocation of more than $730 billion (€540 billion), found that investors are unhappy about expenses such as employee pay, marketing and non-research-related travel being charged to funds.

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