The number of hedge funds continued to shrink last quarter as wild swings in stocks and commodities battered managers’ performance.

More funds shut than started in the first quarter, with 291 liquidated while 206 started, according to data published Thursday by Hedge Fund Research Inc. It was the second consecutive quarter that closings exceeded openings.

Investors exhibited “low tolerance for underperformance, resulting in an elevated number of liquidations,” HFR President Kenneth Heinz said in a statement.

The $2.9 trillion hedge fund industry is under fire from institutions and money managers as many funds have failed to protect clients from volatility. They’ve also drawn increased scrutiny for their hefty fees. Clients pulled a net $15 billion from the vehicles in the first quarter, the most since the financial crisis.

There was one sign of improvement. The number of funds that closed last quarter dropped from the previous period when there 305 shut. Yet in the past 12 months, 910 funds launched while 1,053 funds liquidated, according to HFR measures, as managers struggled to raise capital and some put off starting new funds.

The contraction in the industry has been gradual as investors -- dismayed by prospects in equities and bond markets alike -- see little choice other than to invest in alternatives like hedge funds, private equity and real estate.

A Credit Suisse Group AG survey of 369 institutional investors published in March indicated that most investors intend to recycle redemptions into other funds and strategies rather than pull money from hedge funds completely.