Hedge fund launches and liquidations both set records in 2005. According to year-end data just released by Hedge Fund Research, 2,073 new funds were created in 2005, compared with 1,453 in 2004. The hedge fund liquidation rate last year was 11.4% in 2005, with 848 funds shut down, compared with 4.7% in 2004, when 296 funds closed.
Hedge funds of funds were still being created in 2005, but they represented a smaller proportion of overall fund startups. Last year, 498 new funds of funds were launched, or 24% of total new funds, compared with 465 launches in 2004, or 32.4% of the total, and 479 new funds of funds in 2003, or 43.8% of the total. The rate of funds of funds creation as a percentage of total new fund introductions peaked in 2003, while 2005 represented the apex in hedge funds of funds closures, with 156 funds going out of business, a 9.42% attrition rate, according to HFR data.
HFR bases its data analysis on the 9,000 hedge funds tracked by the firm, including data reported directly to the company by 5,500 hedge funds.