Hedge Funds Shutting At Faster Rate
With the number of hedge funds closing accelerating, there’s talk again that the industry is in for a consolidation.
With the number of hedge funds closing accelerating, there’s talk again that the industry is in for a consolidation. In addition to the big spills of Amaranth Advisors and MotherRock, HF giant Vega Asset Management has seen its assets under management plummet 75% from its $12 billion peak just two years ago (though it reportedly plans to stay in business). More than 2,600 hedge funds have launched since January 2005, according to Hedge Fund Research, but 1,071 have closed during the same period. HFR says in 2005 alone, hedge funds of the total number of operating funds went out of business at a rate of 11.4%, more than double the year before, when 4.7% called it quits. ItÕs not bad news for everyone. The biggest and best hedge funds are just getting bigger and better, which has resulted in an estimated 300 hedge fund managers with more than $1 billion AUM accounting for almost 90% of the entire industry. In the olden days, raising $100 million was great, Richard Portogallo of Morgan Stanley told The Wall Street Journal. ÒNow it is not going to be good enough. In fact, those smaller firms are becoming victims of their size. Just ask Thierry Serero, who shuttered his C60 Capital, which performed well but never grew above $50 million AUM. ÒWe had a bit of chicken and egg problem, Sierro said in a WSJ interview. ÒWe were too small to get the big investors.Ó