The biggest blow came to the fund-of-funds operations that were tarred in the Madoff scandal and continue to drop like flies.

There were 240 liquidations in the quarter, according to hedgefundresearch.com, including 102 funds of funds. That’s the most liquidations since the second quarter of 2009, HFR said.

But the total number of hedge funds and funds of funds crept higher, bolstered by a sixth straight quarter of increased hedge fund launches.

There were 254 funds launched in the first quarter, HFR said, the most since 2007. Hedge funds on average have been just above breakeven this year, with a strong March offset by declines in a selloff-swept May.

The HFRI fund-weighted composite index is up 1.3% this year. The index rose 20% during last year’s stock market recovery after shedding 19% in the meltdown year of 2008.

There are now 9,059 hedge funds and funds of funds in existence, the firm estimates. That’s up 14 from the end of last year but down about 10% from the 2007 peak.

The decline has been more pronounced among funds of funds. They take fees for supposedly sifting the best funds for their investors, but were found in several instances in the Madoff scandal to have done little, if any, due diligence. Customers lost billions, as you may have gathered.

The number of funds of funds has dropped 14% since 2007, to 2,117, HFR said.