Hedge fund investor advisory firm Hennessee Group LLC said the 2004 Hennessee Hedge Fund Index attrition rate was 5.3%.
Hennessee said 2004’s number is inline with the six-year annualized rate of 4.96% and disputes the conventional wisdom of a 15% attrition rate.
“It has been reported that hedge funds have a 15% failure rate, with many hedge funds entering and exiting the marketplace due to low barriers to entry, followed by liquidation due to poor performance. Our statistical findings using the Hennessee Hedge Fund Indices do not support the perception that the hedge fund attrition rate is 15% or more,” stated Charles Gradante, Managing Principal of Hennessee Group LLC.
By comparison, the attrition rate in 2003 was also 5.3%, followed by 3.8% in 2002, 4.3% in 2001 and 6.4% in 2000.