An article in Bloomberg reports that, despite the closure of some bigger name hedge funds, the overall number of liquidations fell in 2018. What may have seemed like an omen for the industry, the article says, is more of a “Darwinian thinning of the herd” that may suggest an improvement in quality.
“As the industry has matured and the regulatory environment has become more vigilant, the cost of setting up shop has risen,” the article reports. “Only truly outstanding managers with a strong track record can garner enough seed capital to start up in the first place. The economies of scale are acting as gatekeepers to keep out the riffraff.”
The article notes that, despite the closures of some big-name firms, the numbers of liquidations declined last year to their lowest level in a decade, suggesting that investors are becoming more willing to weather periods of poor performance.