A record number of hedge funds 344 were liquidated in the third quarter, surpassing the previous quarterly high of 267 funds in the fourth quarter 2006, according to new data from Hedge Fund Research.
Year-to-date Sept. 30, 693 hedge funds or 6.9% of all hedge funds, had liquidated.
In a report accompanying the data, HFRs researchers said if the current pace of liquidations continues, more than 920 funds likely will liquidate by the end of this year, well above the previous calendar-year record of 563 fund closures in 2005. HFR analysts noted that the hedge funds that liquidated were fairly well distributed across strategies, regional investment focus and by manager domicile.
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, Kenneth J. Heinz, HFRs president, said in the report.