Daily Management Review

Number of Hedge Funds Is Falling at a Record Pace


03/18/2016


According to a new study, in 2015 were closed more hedge funds than at any other time since the financial crisis.



Photo credit: Lending Memo
Photo credit: Lending Memo
With regard to liquidation of hedge funds, last year was the worst since 2009. 979 funds have been closed in 2015; to compare, there were 864 of them in 2014, according to Hedge Fund Research.

IV quarter of 2015 recorded the lowest number of new hedge fund. Starting in 2009, there were 183 of them compared to 269 in the III quarter.

The indicators cover the period during which the best-known hedge funds suffered losses. Fund Index HFRI Weighted Composite fell by 0.9% last year. In December, a huge amount of funds has been transformed into "family offices", including Blue Crest of Michael Platt and Seneca Capital of Doug Hirsch, or even been completely closed, such as Lucidus Capital Partners.

Alarmed by this situation, hedge funds’ clients fear to take risks and are afraid of a significant reduction in revenues in the second half of the year, according to HFR’s president Kenneth Heinz. He also noted that many demand to return of their funds.

"Investors are becoming more discriminating in matters of investing, and to establish a new hedge fund is extremely difficult under the current circumstances, given the high level of competitiveness," - said Heinz.

About 20% of funds attracted about 80% of all funds received in the past year, said the brokerage group Barclays. So this year do not promise improvements.

In January, on the background of market losses and redemptions, hedge funds assets fell by $ 64.7 million. As a result, the total amount in the industry fell by $ 3 trillion for the first time since May 2014, according to eVestment’s data report.

February - the month which usually brings largest inflow of funds - received about $ 3 billion, compared with $ 18.6 million last year. Investment losses have reduced total assets of nearly $ 20 billion to $ 2.95 trillion.

The winning strategy was drawn up by computers this year: hedge funds, which examined the trends using financial models and algorithms, headed the lists of the most efficient.

Experts following the trends are generally set out to make a profit in the period of clear prospects for the markets. They have been losing money the last four of five years.

Those, who lived through this period, will face less competition. In a recent study, JPMorgan said that the unsatisfactory situation of the last year has developed on the basis of too many hedge funds, most of which had too few opportunities.

"Instead of investing in hedge funds, many choose to move from one manager to another, using a strategy focused on the volatility of the market" - said JPMorgan’s report.

source: businessinsider.com
 






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