Recently read this article on Business Insider titled The bonfire of the hedge funds (link here). It showed some interesting statistics from Hedge Fund Research (HFR) on the number of funds launched and liquidated every quarter since 2008.
I found the chart hard to read, so I re-plotted the data as shown.
Some summary statistics over the 8 years of data
- Total funds launched = 7,667, or 958 funds per year, or 240 per quarter
- Total funds liquidated = 7,732, or 966 funds per year, or 242 per quarter
- Out of 32 quarters, 25 quarters had net additions, while 7 quarters had net reductions (i.e. net additions for 78% of the quarters)
- Across the 25 quarters with net additions, average net addition per quarter is 57
- Across the 7 quarters with net reductions, average net reduction per quarter 214
The “performance statistics” above reminds me of options trading for income, lots of little gains over a long period of time, then a few big losses that wipe out earlier gains and then some.