HFN: Smaller Hedge Funds Suffer Higher Turnover

Apr 29 2008 | 11:57am ET

While the media focuses on the biggest, most-spectacular hedge fund blow-ups, smaller hedge funds have borne the brunt of the current market difficulties.

A new HedgeFund.net study of hedge fund turnover—defined as removal from HFN’s database due to liquidation, failure to report performance or at the request of the manager—shows that funds with less than $15 million in assets under management, which make up just 21.6% of the HFN database, accounted for 46.9% of the funds exiting the database as of April 15. By contrast, funds with more than $250 million, which make up 30.2% of the database, account for just 9.8% of the turnover—and actually saw a decrease in turnover rates compared to last year.

Structured-credit, fixed-income arbitrage and convertible bond strategies suffered the worst turnover rates compared to their peers. Structured-credit securities funds—which make up just 0.6% of the database—accounted for 4.1% of the exits. Fixed-income arb funds saw their turnover rate more than triple, to 5.2% from 1.5% last year, while making up just 1.9% of the database; convertible bond funds, just 1.3% of all the funds in the HFN database, accounted for 4.1% of the turnover.

Not all hard-hit strategies have seen an increase in attrition. Emerging markets funds, last year’s top performers but this year experiencing above-average losses, saw no increase in turnover. Commodity and foreign exchange funds enjoyed better-than-expected survivability, making up just 2.1% of turnover while accounting for 5.3% of the database.

Japanese-focused hedge funds experienced elevated turnover: Just 2.7% of the database, they accounted for 4.1% of turnover. By contrast, Europe and Asia ex-Japan strategies suffered low turnover. The former are 9% of the HFN database, but account for only 4.6% of turnover, while the latter are 8.6% of the database but just 6.7% of turnover.

The other startling finding is that U.S.-domiciled hedge funds were much more likely to disappear from the HFN database. U.S.-domiciled funds make up 30.4% of the database, but accounted for 47.4% of turnover. Offshore and other non-U.S.-domiciled funds, the bulk of the database, accounted for just 52.6% of turnover.


In Depth

Q&A: Neil Azous Talks Global Macro Investing

Nov 24 2014 | 12:41pm ET

Neil Azous is the founder and managing member of Rareview Macro, an advisory firm...

Lifestyle

Griffin Selling Chicago Apartment

Nov 26 2014 | 11:40am ET

Citadel Investment Group’s Kenneth Griffin is making clear to his estranged wife...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.