Liquidations, Outflows Hit Hedge Fund Industry

Jun 9 2010 | 11:55am ET

Hedge fund liquidations and outflows are back on the rise, according to pair of new reports.

Some 240 hedge funds closed their doors in the first quarter, the first quarter in four to see an increase in hedge fund liquidations, Hedge Fund Research reports. Still, the number of new hedge funds exceeded the number of those folding during the quarter, with 254 launches.

Funds of hedge funds were not so lucky, with 102 shutting their doors during the year’s first three months, with liquidations outpacing launches. The last time more funds of funds debuted than departed was the second quarter of 2008, before the financial crisis hit its stride.

Overall, the hedge fund industry grew with $13.76 billion in net inflows and positive performance in the first quarter, according to HFR. But a chunk of that disappeared in April, according to another report.

Investors yanked $3.5 billion from hedge funds that month, according to BarclayHedge and TrimTabs Investment Research. It’s the third time in five months that investors fled the asset class.

“Recent flow weakness is surprising,” Sol Waksman of BarclayHedge conceded. “Industry performance has been stellar, and April is historically a strong month for subscriptions.”

Still, assets under management by hedge funds hit a 17-month high in April, thanks to strong investment performance.


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