Research shows that 5% of hedge funds went bust in 2005 [see Asset allocation: Hedge funds in M&A turnabout, this issue], and that figure is conservative given that these were funds that were transparent and therefore on the public radar screen. Such figures add to the belief that 2006 will be the year for sector consolidation.
With SEC registration leading to increased costs, and lack of volatility and opportunities impinging on returns, smaller hedge funds, particularly those running single strategies, will be forced to club together with their peers to form multi-strategy organizations.
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