20% of All Hedge Funds went out of Business in the last Two Years

Hedge Funds are generally regarded with a lot of suspicion and frequently accused by politicians of unnecessary speculation and irresponsible behaviour.But unlike politicians of many countries , Hedge Funds are faced with a “vote”  every 3 months based on their performance.If they fail to perform they go out of business in the true spirit of  competitive capitalism.This is reflected in the figures from Barrons which shows 2000 of the roughly 11000 hedge funds go out of business in the last 2 years following the Financials Crisis.The risk and rewards of running a hedge fund are equally great.Its tough for an untalented hedge fund manager to survive in this trade very long as investors are notorious performance chasers and even one bad year can lead to money withdrawals.Other trends being seen in this industry are

1. Smaller Hedge Funds getting weeded out
2. More regulation
3. Many Funds continued to deliver during the 2008 and 2009 Financial crisis

However the rewards are equally great and well known, with many of the richest people in the globe being hedge fund manager none of them more famous the Warren Buffett. Hedge Funds have recovered well with the recovery in the financial markets with AUM recovering to just around 15% below their peak level .

Nicely Trimmed – Barrons

But a lot of hedge funds suffered a far worse fate. Since the financial crisis erupted in late 2008, an estimated 2,000 of them have gone out of business, taking their number down to about 9,000. Hedge-fund assets hit a trough of $1.33 trillion by the end of the first quarter of 2009, down from a mid-2008 peak of $1.93 trillion. The ferment in the group can be seen in our rankings, where about half of the members are new.There are clear signs that hedge-fund investors are getting pickier and more quality-conscious. This year, assets under management have risen to about $1.67 trillion, with the vast majority of the new money going to bigger shops.