- The hedge fund industry saw more closures than openings for the fifth year in a row in 2019, Bloomberg reported Monday, citing data from Hedge Fund Research Inc.
- Investors are quickly fleeing the high-risk funds for cheaper vehicles as the record-long bull market continues to boast steady gains.
- The S&P 500 is up about 29% year-to-date, while the Bloomberg Equity Hedge Fund Index has only gained 10% in the same period.
- Among the funds closing their doors to outside investment in 2019 include Appaloosa, Moore Capital, Vinik Capital Management, and Arrowgrass.
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The hedge fund industry saw more closures than openings for the fifth year in a row in 2019 as dismal returns and lofty fees pushed investors away, Bloomberg reported Monday, citing data from Hedge Fund Research Inc.
The $US3.3 trillion industry saw major players like Appaloosa founder David Tepper and Moore Capital CEO Louis Bacon turn their funds into family offices in 2019. Tepper announced in May he’d turn his focus to the NFL’s Carolina Panthers, a team he recently bought. He is also backing the creation of a Major League Soccer team in Charlotte, North Carolina.
Bacon told investors in December that he’d return outside capital after helming Moore Capital for three decades. In a letter to investors explaining his decision, the CEO noted Moore returned more than 21,000% since its creation in 1989. The firm still plans to launch individual funds run by its portfolio managers.
More than 4,000 funds have liquidated assets over the past five years, according to Bloomberg, citing Hedge Fund Research data. Of the five consecutive years of net fund closures, 2016 marks the only year with more closures than 2019.
Investors fled the high-risk funds for cheaper vehicles amid the record-long bull market. Members have pulled $US81.5 billion from hedge funds in the year through November, Bloomberg reported citing eVestment data, more than twice the amount pulled from funds in 2018.
Here are some of the biggest firms to shut their doors to outside investment in 2019:
- Appaloosa Management
- Moore Capital
- BlueMountain’s flagship and quant funds
- Vinik Asset Management
Hedge funds were also unable to match the S&P 500‘s rapid growth through the year. The index is up roughly 29% year-to-date and on track to post its best yearly gain since 1997.
The hedge fund industry, which relies on risky investments to outperform the general stock market, struggled to keep up. The Bloomberg Equity Hedge Fund Index is up just 10% this year.
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