The global hedge fund industry saw a drop in both launches and liquidations last year compared with the record-setting pace of 2005, according to Hedge Fund Research, a leading provider of
The global hedge fund industry saw a drop in both launches and liquidations last year compared with the record-setting pace of 2005, according to Hedge Fund Research, a leading provider of hedge fund information and performance data.
During 2006, 1,518 funds were introduced and 717 funds liquidated, compared to 2,073 new funds and 848 liquidations in 2005. The overall fund attrition rate for 2006 was 8.28 percent, the second-highest rate recorded by HFR since it began tracking launches and liquidations in 1995.
The highest attrition rate was 11.40 percent in 2005. Last year hedge fund launches returned to a level closer to the 2004 total of 1,435, while liquidations remained near the previous year’s historically high level. By comparison, the total number of liquidations in 2004 was just 296.
Funds of funds accounted for 323 of last year’s new launches in 2006, or 21.3 percent of the total, a decline from 2005 when 498 new funds of funds launches represented 24.0 percent of the total. Last year 98 funds of funds were liquidated, representing an attrition rate of 4.93 percent, down from the previous year’s 156 liquidations, an attrition rate of 9.43 percent.
‘While the absolute number of funds and the amount of aggregate assets managed in hedge funds continued to grow, in 2006 hedge fund launches fell as a proportion of the overall hedge fund universe to the lowest rate since 2000,’ says HFR president Kenneth J. Heinz.
He argues that this is consistent with the historical pattern in which HFR has seen hedge fund launches decrease as a proportion of the total hedge fund universe during periods of strong performance by traditional asset classes and increase in periods where hedge funds outperform equities and fixed income.
HFR’s data is based on information provided by more than 10,500 funds tracked by the firm and information available to it, including more than 6,500 funds that report to the company as part of the HFR Database product.
Founded in 1993, HFR Group specialises in hedge fund data, research, indexation and asset management through companies including Hedge Fund Research and HFR Asset Management. Hedge Fund Research produces HFR Database, a leading source of hedge fund performance and information, and distributes the HFRI Monthly Performance Indices.
