Hedge fund closures in 2007 total $18.6bln, according to Absolute Return

Date: Thursday, March 27, 2008
Author: Absolute Return

At least 49 hedge funds closed down in 2007, representing $18.6 billion in assets, according to recently released research published by Absolute Return magazine, a unit of HedgeFund Intelligence. More than half of the 10 largest shutdowns were on the wrong side of leveraged credit positions, including two Bear Stearns Asset Management structured credit funds and the year’s biggest liquidation, Sowood Capital Management’s $3 billion Sowood Alpha Fund.

So far in 2008, hedge funds with $3.9 billion in assets have shut down, including Peloton ABS Fund and Sailfish Multistrategy Fixed Income Fund.

By number, more long/short equity funds closed than any other strategy, with 16 funds representing $4 billion in assets. Multistrategy funds had the biggest losses in terms of assets, with five fund shutdowns representing $7.3 billion.

Among the notable closings were Citigroup’s September shutdown of the $2.5 billion Tribeca Global Investments and UBS Asset Management’s Dillon Read Capital Management, which had raised $1.5 billion from outside investors.

Hedge fund closures fell sharply from the prior year, when more than 83 funds managing approximately $35 billion were liquidated. The collapse of a single firm, $9.1 billion Amaranth Advisors, was the most significant closure in 2006.

Research conducted by Absolute Return includes only those funds that once managed $25 million or more in assets. The full list was published in Absolute Return’s March issue.

Top ten 2007 hedge closures: