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From Sagar Chakraverty, Opalesque Asia:
“Our universe of dead funds consists of 381 names (since 2001) which included funds that ceased to exist up till December 2009. A breakdown of the funds which closed over the years by strategies revealed that close to 80% of these hedge funds were running equity long/short (L/S) strategies,” wrote Siewling Lay, senior analyst at Singapore-based consulting firm GFIA in her recent white paper titled ‘Mortality Rate of Asian Hedge Funds’.
GFIA research shows that in 2008, when hedge fund closures peaked (at 130 funds), investors lost the most confidence in their L/S equity managers, who represented 39% of the closures in Japan and 16% of Asia-ex Japan. In comparison, only 1 % of macro strategies closed, followed by 2% of multi-strategies, 3% of event-driven strategies, and 4% of arbitrage.
2009 brought slightly higher closures across other strategies (macro – 4%; multi-strats – 6%; event driven - 3%; arb - 4%), but closures of L/S equity funds still outpaced the pack with a rate of 21% for Japan funds and 15% for Asia ex-Japan.
There are two possible explanations for the significant number of L/S equity closures such as: 1) The strategy includes the largest share of industry assets globally (30% of all funds are L/S equity and 20% of all industry AUM is in L/S equity funds), and 2) several L/S equity funds allowed investors monthly liquidity, whereas many arb...................... To view our full article Click here
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