U.S. Markets

More hedge funds closed than started globally in 2017

BOSTON (Reuters) - More hedge funds closed their doors than opened up in 2017, according to global research released on Friday, but the pace of liquidations slowed as the industry attracted fresh cash.

Last year 784 funds went out of business compared with 735 that launched, data from Hedge Fund Research showed. Common reasons for funds to close are poor performance and difficulty raising funds.

This marks some good news for the $3.2 trillion industry after 1,057 funds shut down in 2016, marking the biggest number of liquidations since the financial crisis. Last year’s fund liquidations were the lowest for a calendar year since 2011 when 775 funds shut down.

The industry currently counts 9,754 hedge funds in all, down from a peak of 10,142 in 2014.

Prominent funds including Neil Chriss’ Hutchin Hill Capital, Hugh Hendry’s Eclectica Asset Management and Erich Mindich’s Eton Park Capital shut last year.

But stronger returns - the average fund gained 8.6 percent in 2017 - also translated into fresh money coming into the industry. Investors added some $9.8 billion in new money, boosting overall assets to $3.2 billion.

“The hedge fund industry has accelerated into 2018 with increasing launches and the fewest fund closures since 2011,” HFR President Kenneth Heinz said, adding “It is likely that investors will continue to increase allocations to hedge funds.”

Reporting by Svea Herbst-Bayliss; Editing by Cynthia Osterman