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Holly LaFon
Holly LaFon
Articles (8899)  | Author's Website |

Closing Time for Hedge Funds in 2017, With More Liquidating Than Launching

Although the trend signaled a turn in the latter half of the year

March 23, 2018 | About:

More hedge funds closed their doors in 2017 than opened them, although the trend signaled a turn in the latter half of the year.

For the full-year 2017, 735 hedge funds launched, while 784 liquidated, according to a report from Hedge Fund Research. The year showed a slowdown in the industry, though, with the number of funds shuttering declining 25% from 1,057 in 2016.

Hints of a turnaround in investors fleeing the underperforming and pricey firms surfaced in the fourth quarter. Hedge fund launches totaled 190 in the fourth quarter, an increase from 176 in the third quarter. It was the second consecutive quarter of hedge fund launches exceeding liquidations.

“The hedge fund industry has accelerated into 2018 with increasing launches and the fewest fund closures since 2011, as industry capital eclipsed a new record to begin the year,” stated Kenneth J. Heinz, President of HFR.

“The prevailing financial market environment in 2018 represents a significant shift from the pro-equity environment of 2017, with transitional politics driving transitional economics, which has expanded the opportunity set for hedged, long/short investing. It is likely that investors will continue to increase allocations to hedge funds and alternative investments not only to preserve capital through these transitions but to benefit from the opportunities created,” he said.

While hedge funds as a whole have underperformed the red-hot market over the past year, HFR’s data indicated that it depends on the hedge fund. The HFRI Fund Weighted Composite Index rose 8.6% in 2017, compared to a 21.7% rise in the S&P 500 index. The top decile of funds, however, soared 38.4% for the year, while the lowest decline declined 13.4% on average.

2017 claimed several notable hedge funds. Most famously, Eric Mindich (Trades, Portfolio)’s Eton Park Capital Management closed its doors after failing to beat the market following its launching in 2004. Ken Griffin, a former protégé of Julian Robertson (Trades, Portfolio)’s Tiger Capital Management, also shut down Blue Ridge Capital after 21 years as losses mounted. Whitney Tilson (Trades, Portfolio) announced he would close his hedge fund, Kase Capital, in September, citing poor performance and lack of attractive investments.

About the author:

Holly LaFon
I'm a financial journalist with a master of science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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