HFR: Hedge Fund Liquidations Dip In Q2/17 As Industry Assets Surge

Sep 19 2017 | 7:58pm ET

Hedge fund liquidations dipped in the second quarter, according to new data from Hedge Fund Research, although the number of new launches was slightly lower as well.

The number of funds closing their doors in the second quarter totaled 222, compared with 259 in the first quarter of this year and 239 liquidations in last year’s comparable quarter. Meanwhile, launches totaled 180, essentially flat with the first quarter’s 189 and slightly higher than the 170 seen in the second quarter of 2016.

Despite the lower launch number, a surge of investor capital during the quarter and nine consecutive months of performance gains brought total hedge fund industry capital to a record $3.1 trillion through June, HFR said in a statement. 

HFR’s data also revealed average hedge fund management and incentive fees have fallen slightly from first quarter levels, with average management fees reaching 1.46% in the second quarter and average incentive fees falling to 17.2%. Funds launched last quarter had even lower average comp numbers, at 1.28% and 16.9%, respectively. 

Only an estimated 30% percent of all hedge funds currently charge management and incentive fees equal to or greater than the traditional 2-and-20, HFR added. 

"Hedge fund liquidations declined as total industry capital eclipsed another record with new investor inflows, while [hedge funds] extended steady performance gains through mid-2017," stated Ken Heinz, president of HFR, in the statement. "We expect a continuation of the favorable trend in new launches, as well as expansion of the alternative investor base to also encompass Risk Parity & Risk Premia strategies.”

Established in 1992, HFR is a global leader in specializing in the indexation and analysis of hedge funds. The company produces the HFRI, HFRX and HFRU Indices, industry benchmarks for global hedge fund performance, and calculates over 100 indices ranging from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus.

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