Wednesday, December 3, 2014

Hedge Funds Closing Up Shop

A report from Bloomberg News yesterday looked at what a tough year it has been for hedge funds. Through the first half of this year, 461 hedge funds had shut their doors. At that pace, we could have the worst such year since 2009, when 1,023 hedge funds closed down, a record number.

In 2009, we had the recession to blame. This year, we've had an economy that continues to recover and a stock market that has returned roughly 12 percent to date, as measured by the S&P 500. By contrast, the average hedge fund has returned just 2 percent this year. It's no wonder they've been shutting down.

Another result of that poor performance is that nearly all the assets are flowing to the larger, more established hedge funds. In the first half of 2014, according to the Bloomberg report, roughly a third of the $57 billion invested into hedge funds went into just 10 firms.

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