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Hedge Fund Industry Consolidation

Hedge Fund Industry Consolidation

Report: 1 in 5 Hedge Funds Could be Liquidated by Next Year

Merrill Lynch has issued a gloomy report about the hedge fund industry, predicting that as much as 20% of hedge funds could be liquidated by next year. The reason for the consolidation, according to the report, is that investors increasingly prefer larger hedge funds making it very difficult for hedge fund start-ups to raise capital.
Consolidation isn’t the only force likely to shrink the hedge fund industry, according to a new report.

Bank of America Merrill Lynch predicts that as many as one in five hedge funds could be liquidated by next year. The culprit? A brutal fundraising environment in which investors increasingly prefer larger hedge fund managers.

“Going into the year-end, there will be significant closures and we estimate it could be as high as 20%,” the firm’s Justin Fredericks told Bloomberg News. “A large portion of managers are still below high-water marks. Performance is flat and money hasn’t been flowing to smaller managers.”

Hedge fund managers running less than $100 million are the most likely to be affected by the hedgicide, Fredericks, Merrill’s head of U.S. capital introductions said. Source

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