Hedge fund industry show early signs of rebound
The number of hedge funds shutting down in the second quarter of this year continued to outpace the numbers that opened up, although practitioners predict that this trend will reverse after managers enjoyed their best start to a year in a decade.
Almost 300 funds shut down in the second quarter while 182 launched, according to data provider Hedge Fund Research. The firm's president Kenneth Heinz said this showed that the aftershocks of the credit crunch continued to be "both widespread and sustained." However, the rate of closures has slowed - as there were 376 closures in the first quarter - giving hope for the the $1.4 trillion (€950bn) industry will be better than last. Last year, managers closed 1471 funds and posted a 19% loss, their most severe drop since HFR began monitoring their performance in 1990. In comparison, this year, hedge funds have made a 14% return, HFR said, the same performance they clocked by the end of August in 1999. Data provider Eurekahedge registered 141 launches last quarter - a different figure to HFR's in part because different funds report to different databases. This was 34 more than in the three months to the end of March, said Ankur Samtaney, senior analyst at Eurekahedge Samtaney said: "We’ve seen net inflows of $30bn [into hedge funds] over the last four months, and the industry’s assets are up nearly $100bn from the lows of $1.29 trillion in April, which is a very encouraging sign." Investing long and short in equities, traditionally the most popular investment strategy to launch, has given birth to the most funds this year, comprising about one fifth of all start-ups in the industry, including of funds of hedge funds, said data provider Lipper Tass. Global macro, an investment strategy whose remit gives its managers license to invest in a very wide range of financial markets, and which was one of only two strategies to make money last year, accounts for one in every 10 launches so far this year. Funds of hedge funds starting up accounted for about one third of all the industry's launches in the second quarter. The preponderance of these launches was, perhaps, surprising, given the strong criticisms levelled at the fund of hedge funds industry late last year and early this year, for its charging high fees, and losing 21% on investments last year, two percentage points more than the average hedge fund, according to data providers Hedge Fund Research. -- Write to David Walker at dwalker@efinancialnews.com
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