FAST FIVE: Hedge Fund Liquidations Soar To Highest Level Since 2015

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This was the highest level of fund liquidation since the fourth quarter of 2015, when 305 funds shut down.

Shown below, the number of closures in 1Q20 is about 50% higher than the last quarter in 2019.  h/t Bloomberg  Even before the pandemic, hedge funds suffered eight straight months of redemptions, the longest stretch since the financial crisis.  During the market turmoil in late February and March, money managers were severely bruised by collapsing asset prices, lockdowns, economic paralysis, and high unemployment.

HFR showed investors pulled $33 billion out of hedge funds in the first quarter, the fourth largest outflow in history.  Only 84 new funds were created in the first quarter, the slowest pace of fund creation since the fourth quarter of 2008.

– Bloomberg  Kate Holleran, managing director of capital solutions at Barclays Plc, said, “we're hearing anecdotes of investors revising or paring back their redemption requests” with hedge funds.

With all this newfound optimism for hedge funds as equity markets have already soared on unprecedented central bank intervention, any hiccup in reopenings, or if investors catch wind a V-shaped recovery in the economy is merely a hoax – then expect stocks to sell and investors to resume redemptions. .

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