Hedge fund liquidations accelerated to a new record in the third quarter and outpaced the launches of new funds, according to a report released Thursday.
Hedge Fund Research, a source of hedge fund information and performance data, said that 344 funds closed during the third quarter, topping the previous record of 267 set in the fourth quarter of 2006. Liquidation totals for the year-to-date were up 70% compared with the same three-quarter period a year ago, when 409 funds were closed out.
On an annualized basis, Hedge Fund Research said the current year is on pace for more than 920 fund liquidations, easily exceeding the 2005 record of 848 and far surpassing last year's liquidation total of 563.
The firm also said that 117 new funds launched in the third quarter, pushing the total to 603 for the year. Hedge Fund Research said that number represents 90 fewer funds than were liquidated during the same nine-month period. The third quarter is the first period in which the industry experienced more liquidations than launches since the firm started tracking hedge fund data in 1996.
"The hedge fund industry is currently experiencing a structural consolidation that mirrors broader trends across the entire financial industry," said Kenneth Heinz, president of Hedge Fund Research, in a release. "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."