Hedge funds close for a variety of reasons. For one, raising capital can be quite challenging for hedge fund managers. Given the intense level of competition in the industry, a lot of new or emerging funds are forced to close because they do not raise enough capital. Managing a fund can carry a lot of fixed and variable expenses, so if you cannot cover those expenses, you won't be able to keep your fund up and running. Second, funds close due to poor performance. Some managers are forced to return capital to investors following poor performance, while others simply find that their strategies are no longer effective under current market conditions. Hundreds, if not thousands of funds close every year because of a variety of factors.