January 31, 2007 – New York, NY – Hennessee Group LLC, an adviser to hedge fund investors, today announced that the estimated attrition rate for the Hennessee Hedge Fund Index in 2006 was 5.1%. The attrition rate includes hedge funds with assets greater than $10 million that have liquidated. Liquidations typically occur for a number of reasons including a declining opportunity set for the strategy, poor performance, or career choices, such as the retirement of the portfolio manager. It does not include hedge funds that are currently operating, but have closed to new capital. This year’s number is slightly lower than the eight year average attrition rate of 5.2%. The attrition rates for the last eight years are as follows:
1999 |
4.7% |
2000 |
6.4% |
2001 |
4.3% |
2002 |
3.8% |
2003 |
5.4% |
2004 |
6.2% |
2005 |
5.4% |
2006 |
5.1% |
“Despite the fact that the investment management business is extremely competitive, the attrition statistics do no imply that failures in hedge funds are substantially higher than other industries,” stated Charles Gradante, Managing Principal of Hennessee Group LLC. “Furthermore, we are seeing evidence of rising barriers to entry within the industry, including the need for more expensive infrastructure to attract institutional money, which favors larger funds and creates difficulty for start-up and moderately sized funds to sustain growth and attract top talent.”
“Long term, we believe the attrition rate will decline as the evolutionary process continues, leaving the industry to be comprised mostly of funds with larger infrastructure and size, commensurate with institutional needs,” concluded Mr. Gradante.
The Hennessee Hedge Fund Index is the hedge fund industry’s oldest hedge fund index, having begun in 1987 and been maintained on a real time basis since inception. The Index is used solely as a benchmark for hedge fund managers and investors and is compiled of approximately 1,000 hedge funds. The Index is not investable nor is it offered as a hedge fund product.
About the Hennessee Group LLC
Hennessee Group LLC is a Registered Investment Adviser that consults direct investors in hedge funds on asset allocation, manager selection, and ongoing monitoring of hedge fund managers. Hennessee Group LLC is not a tracker of hedge funds. The Hennessee Hedge Fund Indices® are for the sole purpose of benchmarking individual hedge fund manager performance. The Hennessee Group does not sell a hedge fund-of-funds product nor does it market individual hedge fund managers. For additional Hennessee Group Press Releases, please visit the Hennessee Group’s website. The Hennessee Group also publishes the Hennessee Hedge Fund Review monthly, which provides a comprehensive hedge fund performance review, statistics, and market analysis; all of which is value added to hedge fund managers and investors alike.
Description of Hennessee Hedge Fund Indices®
The Hennessee Hedge Fund Indices® are calculated from performance data supplied by a diversified group of over 1,000 hedge funds monitored by the Hennessee Group LLC. The Hennessee Hedge Fund Index is an equally weighted average of the funds in the Hennessee Hedge Fund Indices®. The funds in the Hennessee Hedge Fund Index are derived from the Hennessee Group’s database of over 3,500 hedge funds and are net of fees and unaudited. Past performance is no guarantee of future returns. ALL RIGHTS RESERVED. This material is for general information only and is not an offer or solicitation to buy or sell any security including any interest in a hedge fund.
