Hedge funds clipped amid volatile markets

The rocky financial markets of 2008 have taken a toll on hedge funds, with liquidations up and new fund launches down, according to the latest data from HFR Group LLC in Chicago. Through the first half of the year, 350 hedge funds went out of business, reflecting a 15% increase, compared with the 303 liquidations in the comparable period in 2007. Last year’s total liquidation figure was 563, according to HFR. The current pace is still not likely to reach the record year of 2005, when 850 funds closed their doors. Meanwhile, hedge fund launches have not been strong enough to offset the closings. Through the first six months of 2008, 487 hedge funds were launched. This pace, if continued for the full year, would mark the lowest number of hedge fund launches since 2001. “The environment of the last 12 months has been characterized by volatility, performance dispersion and asset consolidation toward the largest hedge fund firms,” said Kenneth Heinz, HFR’s president. HFR estimates there are more than 10,200 hedge fund vehicles managing more than $1.9 trillion.