Hennessee Group reported that the hedge fund attrition rate, which includes hedge funds with assets greater than $10 million that have liquidated their assets, was 3.9% for 2005, below the 7-year average annual rate of 4.9%.
The hedge funds included in the Hennessee attrition index track funds that have liquidated as a result of poor performance or a changing career path of managers.
“It has been reported that hedge funds have a 15% failure rate, with many hedge funds entering the marketplace due to low barriers to entry, followed by liquidation due to poor performance,” said Charles Gradante, managing principal of Hennessee Group LLC. “Our findings using the Hennessee Hedge Fund Indices do not support the perception that the hedge fund attrition rate is 15% as this number likely includes hedge fund managers who close to new capital, but are still in business.”