here is an article i found on Bloomberg..
Hedge Funds Shut at Record Rate in 2005, Report Says (Update1) 2006-02-28 21:27 (New York)
(Adds fund sales 2005 percent decline in final paragraph.)
By Katherine Burton Feb. 28 (Bloomberg) -- A record 11 percent of hedge funds went out of business last year, as profits were crimped by long- term interest rates that fell to near short-term rates and stock prices that stayed stable, according to Hedge Fund Research Inc. Funds that failed rose to 848 from 296, or 4.7 percent of the total, in 2004, the Chicago-based research firm said today in a statement. Funds that closed included two run by Greenwich, Connecticut-based Severn River Capital Management, and DKR Capital Inc.'s DKR Nexus Fund in Stamford, Connecticut, managed by Darren Davy. ``It is an unforgiving environment,'' said Josh Rosenberg, president of Hedge Fund Research. It was the highest failure rate since 2002, when 5.5 percent of the loosely regulated investment pools shut down, he said. Hedge funds, which cater to wealthy investors and institutions, returned 9.3 percent in 2005, down from an average of 16 percent a year in the 1990s, according to Hedge Fund Research. There were 2,073 new funds last year, up 44 percent from 2004. Hedge-fund assets have more than doubled since 2000 to $1.1 trillion. There were 8,661 funds worldwide at the end of last year. ``It remains an enormously active marketplace,'' Rosenberg said. The gap in yield between two-year and 10-year U.S. Treasury notes narrowed from 112 basis points at the beginning of 2005 to about 1 basis point at the end of the year. A basis point is 0.01 of a percent. The Chicago Board Options Exchange VIX Index, a measure of how much investors expect stock prices to move, averaged 12 last year, compared with an average of 22 over the previous four years.
Funds of Funds
The percentage of funds that farm out money to hedge funds, known as funds of funds, accounted for 24 percent of new funds in 2005. In 2003, they accounted for a record 43.8 percent. Funds of funds had withdrawals of $2.1 billion in the last three months of 2005, according to Hedge Fund Research. For the year, fund of funds attracted $9.5 billion, compared with $33 billion in 2004 and $59.4 billion in 2003. They now account for $395 billion, or 36 percent, of hedge-fund assets. Hedge funds attracted $46.9 billion last year, a decline of 36 percent from 2004 and the least since 2001, according to Hedge Fund Research.
--Editor: Edelman
Story illustration: For Bloomberg's hedge-fund home page, see {HFND <GO>}. For Hedge Fund Research's monthly indexes, see http://www.hedgefundresearch.com.
|