The hedge fund industry saw billions of dollars of new money last year, but more than 350 hedge funds shut down primarily because of poor performances by managers, according to data released by the Hennessee Group.

The New York-based group that helps pick hedge funds for investors said that the $1 trillion industry lost 5.3% of its managers in 2004. Poor performance and career choices were the main reasons why managers quit in 2004.

It is difficult to determine how many hedge funds exist today since they are not required to be registered with U.S. regulators. Still, analysts believe there were roughly 7,000 funds last fall.

Due to a slow market, the average hedge fund returned only 9.64% last year, lagging behind the average stock mutual fund's 11.96% return and the industry's own 15.44% gain in 2003, according to data from the Credit Suisse First Boston Tremont Index and Lipper.

Compared to last year, the attrition rate in 2003 was also 5.3% but that year saw more significant returns. The poor performance of many hedge funds such as Andor Capital drove investors to pull out billions of dollars, causing more financial strain on managers.

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