More cheer for hedge funds as liquidations fall 50 per cent

THE pace of hedge fund closures slowed in the first quarter, falling by 50 per cent compared to the final three months of 2008, in yet more good news for the industry.

The record hedge fund liquidations seen in last three months of 2008, when 778 vehicles folded, proved to be short-lived, according to research released yesterday by US data provider Hedge Fund Research (HFR).

During the first quarter of this year, 376 funds failed. Around half of these were funds of hedge funds, which saw a significant increase in liquidations, as the spike in hedge fund closures in 2008 and the Madoff scandal took their toll.

Meanwhile, new start ups rose during the first quarter, with 150 funds entering the market, the highest rate since the second quarter of 2008.

Yet the first-quarter data is still troubling for hedge fund managers, representing an attrition rate of four per cent, the second-highest ever recorded by the research firm.

HFR said that since mid-2008, the industry has declined by nearly 1,200 funds to stand at a total of 9,050 funds.

And the Chicago-based firm also found that average management fees slipped to 1.57 per cent in the quarter.