Launches & Closures

A look behind the fund closures


It's not just bad returns that prompt shutdowns; higher business costs and lack of scalability for some strategies took a toll in 2005

To get a sense of why shutdowns of U.S. hedge funds doubled last year, consider the case of Chicago-based Driehaus Capital Management. In early January, the mutual fund giant was in the process of liquidating its entire hedge fund portfolio, effectively retreating from the alternative sector after a four-year foray.

What prompted a Driehaus retreat? Since its inception in 2001, the Driehaus Long/Short Advantage funds, managed by Jeff James, posted an average annualized