Hedge Fund Liquidation increases

A record number of hedge funds liquidated in the third quarter of 2008 with 344 funds closing, far exceeding the previous quarterly record of 267 set two years ago.

On the other hand, there were 117 new funds launched in the third quarter, bringing the total for the year to 603, 90 fewer 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 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. 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.