HF Launches Hit Eight-Year Low
Jun-26-2008 | From Euromoney
The number of hedge funds launched in the first quarter was the lowest for a quarter since 2000, Financial Planning reports. This is chiefly because of volatile market conditions and the credit crisis. Fund liquidations increased from a year earlier.
There were 247 hedge fund launched in the first quarter, down from 251 a year earlier, according to Chicago’s Hedge Fund Research Inc. It said 170 hedge funds were liquidated in the three months, 23.2% more than in last year’s first quarter.
The attrition rate, defined as the percentage of funds liquidated, was 1.68, up “slightly” from a year earlier, the company said.
Single-manager hedge funds had the most liquidations, with 155 closed during the quarter. Of these, equity hedge strategies had the greatest turnover, accounting for over 50% of both launches and liquidations. Macro hedge funds, the top-performing strategy since the third quarter of last year, accounted for 20% of hedge fund launches in the first quarter.
Kenneth J. Heinz, the president of Hedge Fund Research, said hedge funds are generating “essentially flat” returns, generally because of difficult economic conditions.
Heinz said he would be surprised if returns remained flat for the rest of this year. The HFRI Fund Weighted Composite Index has returned 13.4% on an average basis annually over the past 18 years, he said.
“I expect to see greater capital flows into the industry, but I think we will see a lot of those flows moving into larger funds,” he said.