Survey Says $300M Needed To Launch New Hedge Funds

Dec 12 2013 | 1:07pm ET

It takes more than a quarter of a billion dollars to get a new hedge fund off the ground, according to a new survey by Citigroup.

Traders striking out on their own need at least $300 million in initial assets, due to increased regulatory costs and falling management fees. "Fee compression continues to reshape the business of hedge funds, lowering fees even as expenses rise, all but eliminating fee-only operating margins, and raising the level of assets needed for a hedge fund business to succeed," Citi prime brokerage chief Alan Pace said.

According to Citi, management fees have fallen to as low as 1.58%. At that level, without at least $1 billion in assets, managers must earn some performance fees to remain in the black, the bank said.

And, bad as things are in the U.S., they are much worse in Europe, where expenses are at least 20% higher than on the other side of the Atlantic—higher and rising, with new regulations poised to come into force.

The Citi survey questioned 124 hedge funds with $465 billion in assets.


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

Often seen as a passion project, or part of a philanthropic venture, rare and fine stringed instruments offer an exciting option to diversify one’s investment portfolio while providing an opportunity for an exceptional long-term investment.