A record number of hedge funds liquidated in the third quarter of 2008, according to Hedge Fund Research (HFR).
The research firm said that 344 funds closed during the quarter, far exceeding the previous quarterly record of 267, set in the fourth quarter of 2006.
A total of 693 funds have liquidated in 2008 through the end of third quarter, approximately 6.9 percent of the overall industry. During the first three quarters of 2007, comparatively, 409 funds were liquidated.
Hope spring eternal, however, even on Wall Street. HFR reported that 117 new funds launched in the quarter, bringing the total for the year to 603.
The third quarter was, nevertheless, the first period in which the industry experienced more liquidations than launches since HFR started tracking this data in 1996.
“The hedge fund industry is currently experiencing a structural consolidation that mirrors broader trends across the entire financial industry,” said Kenneth J. Heinz, President of Hedge Fund Research, Inc.
“The combination of a sustained increase in asset price volatility with the decrease in liquidity has widened the differentiation between funds and increased the challenges for both funds and investors.”
HFR data is based on the more than 13,000 funds tracked historically by the firm which includes the over 7,800 funds reporting to the company as part of the HFR Database subscription product. As of the end of Q3 2008, HFR estimates the entire industry to contain more than 10,000 funds, which includes more than 7,400 single-manager funds.
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