March 18 (Bloomberg) -- Hedge-fund liquidations rose to an all-time high last year, with about 15 percent of the industry’s offerings disappearing as managers posted record losses, according to Hedge Fund Research Inc.

About 1,471 funds shut down, data compiled by the Chicago- based research firm show. The closures exceeded by 70 percent the previous record of 848 set in 2005, the company said. In the fourth quarter, about 778 funds closed as investors withdrew $150 billion, Hedge Fund Research said.

“It’s been a great culling of mediocre managers,” said Tammer Kamel, president of Toronto-based Iluka Consulting Group Ltd., which advises clients on hedge-fund investments. “Those funds that will be around this year are the ones with the right skill set.”

Hedge funds lost an average 19 percent last year, the industry’s worst returns since Hedge Fund Research started tracking data in 1990. Client assets fell by 37 percent from the peak in June to $1.2 trillion amid the biggest losses in equity markets since the Great Depression, according to Morgan Stanley.

Among the firms shutting funds were Drake Management LLC, a firm started by former executives from BlackRock Inc.; Peloton Partners LLP, the London-based firm run by former Goldman Sachs Group Inc. partners; and Ospraie Management LLC, run by Dwight Anderson in New York.

The closings represented about 15 percent of 9,284 funds in the industry, Hedge Fund Research said. The total included more than 275 funds of hedge funds, which allocate money to managers on behalf of clients, shut down.

Fewer Openings

There were about 659 openings last year, the lowest since 2000, when 328 funds were set up, the research company said. Fifty-six funds were started in the fourth quarter, compared with 117 in the previous quarter.

Nicholas Maounis, whose hedge fund firm Amaranth Advisors LLC collapsed under a record $6.6 billion loss in 2006, started a firm, Verition Fund Management LLC, in September.

David Stemerman, formerly of Stephen Mandel’s Lone Pine Capital LLC, founded Conatus Capital Management LP in Greenwich, Connecticut, in early 2008. Alyeska Investment Group LP was started last year by Anand Parekh, who was previously global stock head of Ken Griffin’s Citadel Investment Group LLC.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices, and participate substantially in profits from money invested.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net

Last Updated: March 18, 2009 10:20 EDT