It's boom and bust in the hedge-fund world as both liquidations and new launches spike

By Steve Goldstein

Greenwich, Conn. is the home to many hedge-fund managers.

The number of hedge-fund liquidations reached a two-year high in the first quarter, a period which also saw a boom in new launches.

Hedge-fund industry data provider HFR on Wednesday said there were 129 hedge-fund liquidations in the first quarter, up from 45 in the previous quarter and the highest total since the second quarter of 2024.

At the same time, there were also 166 new hedge funds launched, a gain of 30 from the previous quarter and an increase of 45 from the first quarter of 2025.

Hedge-fund performance has generally been pretty solid this year. HFR's 500 fund-weighted composite index rose 7.1% through the first half of the year, about the same as the typical 60/40 portfolio of equities and bonds.

That said, performance has been uneven. Analysts at Syz Capital, a Swiss firm specializing in alternative assets, wrote that the first half witnessed "increasingly idiosyncratic" performance due to an uncertain macro environment which led to periodic correlation spikes, factor rotations and deleveraging episodes.

"Equity hedge managers with concentrated exposures, and some macro funds experienced meaningful drawdowns, and for managers already below their high-water marks, the combination of weak performance and investor redemptions likely made closure the most rational commercial decision," added Bruno Schneller, managing partner at Erlen Capital Management,

Smaller hedge funds also are challenged by higher interest rates and investor preference for larger, well-resourced multi-manager funds, he said.

"In many respects, periods of elevated volatility tend to accelerate the industry's natural process of creative destruction: weaker or undifferentiated managers exit the market, while capital is reallocated to firms with stronger infrastructure, more scalable investment processes, or expertise in areas such as AI-related opportunities, digital assets, private markets, and complex macro trading," he said.

-Steve Goldstein

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07-15-26 0549ET