In our last post, we covered how survivorship bias can turn a good study bad. Lest you think survivorship bias is of minimal impact, with most funds making it through unscathed, it’s also important to be aware that the evidence informs us otherwise.

In a 2013 paper, “The Mutual Fund Landscape,” Dimensional Fund Advisors reported that, at the start of 2008, investors could have chosen from more than 3,000 stock funds. After 10 years, only 51 percent of these funds remained, with the grim reaper having claimed the rest. Statistics were similar for bond funds during the same period, with 57 percent survival rate.

In separate coverage Barron’s columnist Brendan Conway reported that in 2013 alone, nearly 10 percent of all hedge funds quietly passed away – approximately 900 of 9,900 total hedge funds – in “just a single year’s fund deaths.”

Unfortunately, it’s hard to kill a vampire. “Don’t worry, would-be hedge-fund managers,” Conway quipped. “More than 1,000 new funds launched last year, as was the case in 2011-12.”

It seems there are never enough silver bullets to go around.

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