U.S. Markets

Global hedge fund liquidations surge as coronavirus hurts returns: data

BOSTON (Reuters) - More hedge funds went out of business during the first three months of 2020 than at any other time since 2015 as the coronavirus led to heavy losses and investors pulled out billions in assets.

Hedge Fund Research reported on Tuesday that 304 funds liquidated around the world in the first quarter, marking the highest level since the fourth quarter of 2015 when 305 funds shut down. The number of closures is 50% higher than it was during the last three months of 2019 when 198 funds were liquidated, HFR data show.

Managers grappled with gyrating markets in late February and March as investors worried about the virus’ death toll, shuttered economies and rising unemployment rates. Investors pulled $33 billion out of hedge funds in the first quarter, HFR reported earlier, marking the fourth-largest outflows ever.

At the same time only 84 new funds opened for business in the first quarter of 2020, the slowest pace of new launches since the financial crisis when 56 new funds opened for business in the fourth quarter of 2008, HFR said. The pace of new launches fell off even from late 2019 when 89 funds opened in the last three months of the year.

This leaves 8,081 hedge funds and 1,167 funds of hedge funds, where managers create a portfolio of hedge funds for their clients, for investors to choose from.

Hedge funds have struggled to deliver top returns over the last years which has made fund raising tough. Law firm Seward & Kissel reported that travel restrictions during the pandemic have had a dramatic impact on fund raising. Some long-closed funds have agreed to take in new capital and investors have expressed interest in funds that specialize in credit, healthcare, and municipal bonds, the firm’s recent surveys found.

Reporting by Svea Herbst-Bayliss; Editing by Andrea Ricci