Here we go again. Wasn't it just last week when the Hennessee Group announced that hedge fund closings last year were at a near-record low at 3.9%? Hennessee pooh-poohed talk of a 15% attrition rate, but Hedge Fund Research has released its own report, and declares that 2005 saw a record-high attrition rate of 11.4%, more than double the 4.7% in 2004. HFR did not distinguish between funds that went out of business and those that just stopped taking new investments, as Hennessee did, but based on its own record, the change is shocking.

For what it's worth, HFR found that in 2005 there was a 50% jump in new hedge funds, 2,073 vs. 1,435 in 2004, but a roughly 340% surge in closings, from 296 in 2004 to 848 last year. The attrition rate for funds of hedge funds was a record 9.42%, according to HFR. HFR President Joshua Rosenberg points to poor performance as a primary factor. There are also fewer new FoFH on the market; last year they accounted for 24% of the newbies, compared with 32.4% in 2004 and the 44% peak of 2003.