Hedge Fund Closure Assets Reach $18B

More than half of the 10 largest shutdowns took losing leveraged credit positions, including two Bear Stearns Asset Management structured credit funds and the year’s biggest liquidation, Sowood Capital Management’s $3 billion Sowood Alpha Fund, according to a news release.

More long/short equity funds closed than any other strategy, with 16 funds representing $4 billion in assets. Multistrategy funds had the biggest losses in terms of assets, with five fund shutdowns representing $7.3 billion in assets, the announcement said

Among the notable closings were Citigroup’s September shutdown of the $2.5 billion Tribeca Global Investments and UBS Asset Management’s shutdown of Dillon Read Capital Management, which had raised $1.5 billion from outside investors.

Hedge fund closures fell sharply from the prior year, when more than 83 funds managing approximately $35 billion were liquidated. The collapse of a single firm, $9.1 billion Amaranth Advisors, was the most significant closure in 2006.

So far in 2008, hedge funds with $3.9 billion in assets have shut down, including Peloton ABS Fund and Sailfish Multistrategy Fixed Income Fund.

Research conducted by Absolute Return included only those funds that once managed $25 million or more in assets. More information is available at www.hedgefundintelligence.com/ar.