A Blog by Jonathan Low


Mar 28, 2016

Hedge Fund Shutdowns Outnumbered Startups Last Year

What do economic fundamentals predict about the returns to enterprises employing the same strategies and technology, run by people with identical educational backgrounds and training - and promising their investors the same results? JL

Will Wainewright reports in Bloomberg:

There was “elevated dispersion” of returns, with some up by 20 percent and others down by the same amount. Hedge funds averaged a 1.1 percent decline in 2015.
Hedge-fund shutdowns outnumbered startups last year for the first time since 2009, according to data firm Hedge Fund Research, as the global industry contracted amid market volatility.
In the last quarter, 305 funds closed compared with 257 a year earlier, taking the total for the year to 979. Startups totaled 968, the Chicago-based company said in a report on Thursday. In 2009, hedge-fund closures totaled 1,023 and 784 opened.
“The market environment was tough for investors in 2015 and hedge funds are no exception,” said Philippe Ferreira, a strategist at Paris-based Lyxor Asset Management, which allocates money to hedge funds. There was “elevated dispersion” of returns by money managers, with some up by 20 percent and others down by the same amount, he said.
Among the firms that returned money to investors were London-based Comac Capital and Fortress Investment Group LLC, which closed its $2.3 billion macro business run by Michael Novogratz after posting losses.
Hedge funds averaged a 1.1 percent decline in 2015, according to HFR’s index. Last year’s contraction in funds came “despite continued growth in investor capital to a record level,” said HFR president Ken Heinz. “The environment for launching a new fund continues to be extremely competitive.”


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