A record number of hedge funds liquidated in the fourth quarter, more than doubling the old record, as investors withdrew more than $150 billion from the industry, according to Hedge Fund Research Inc.
Hedge funds posted their worst year on record in 2008 as investors converted holdings to cash and some funds faced unexpected disruptions to their trading strategies, including temporary bans on short-selling stock, the company said Wednesday.
It said 778 funds liquidated during the fourth quarter. The previous high for a quarter was 344, set in the third quarter of 2008. For the year there were 1,471 liquidations, topping the previous yearly record, set in 2005, by 70%. More than 275 funds of hedge funds liquidated last year, also a record.
Nearly 100 percentage points separating the top 10% of performers from the bottom tier, also a record, Hedge Fund Research said. Absolute Return magazine said more than 200 hedge funds or fund families in the Americas shut or began to liquidate last year.
The Bernard Madoff scandal contributed significantly: Madoff feeder funds accounted for more than 20% of the liquidated assets, the magazine said. Three of the top funds that closed last year were Madoff feeder funds.