Hedge Fund Liquidations Up 14% In H1 2012

Sep 13 2012 | 11:52am ET

Hedge fund liquidations in the first half of 2012 were up 14% over H1 2011 totals, reports Hedge Fund Research in its latest industry report.

A total of 192 funds closed up shop Q2 2012 alone.

In terms of launches, there were 304 in Q1 and 245 in Q2 2012, the latter being the lowest quarterly total since Q4 2010.

Industry performance declined in the second quarter of ‘12, with the HFRI Fund Weighted Composite Index falling 2.8%, although performance improved through the end of August, with the index gaining 1.7% in the first two months of the third quarter.

The gap between the top and bottom decile of funds narrowed to 23.2% in Q2, with the top decile reporting an average gain of 7.0% and the bottom reporting an average decline of 16.2%.

Management fees remained largely unchanged at 1.57% across the industry, although funds launched in 2012 carried an average fee of 1.65%. Incentive fees were also up industry-wide, adding 4 basis points to 18.76% while funds launched in 2012 carried average incentive fees of 18.23%—up 15 basis points over funds launched in 2011. Over 80% of funds charge incentive fees between 16 and 20%.

“New fund launches through mid-2012 declined from the prior year as a result of three factors: weak performance in Q212, continued low levels of investor risk tolerance and uncertainty surrounding increased reporting requirements and infrastructure costs,” said Kenneth J. Heinz, HFR president, in a statement. “Despite total hedge fund industry assets rising to a record level of $2.14 trillion in the first half of 2012, the capital raising environment continues to be challenging, particularly for small to mid-size funds. Increased certainty about regulation, reporting and marketing, as well as a normalization of investor risk tolerance, is likely to result in more fund launches and improved capital raising conditions through the second half of the year.”


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