Tuesday, 22 July 2014
Last updated 6 hours ago
Jun 19 2008 | 12:44pm ET
Volatile financial markets and credit concerns in the first quarter contributed to the fewest hedge fund launches since 2000, while fund liquidations increased from last year’s levels.
Just 247 funds debuted in the quarter, down from 251 in the same period last year, according to estimates from Hedge Fund Research. Meanwhile, hedge fund liquidations were up sharply, with 170 funds closing their doors, compared to 138 in Q1 2007. The attrition rate, defined as the percentage of funds liquidated over the total number of funds as of the beginning of the year, was 1.68% for the first quarter, up slightly from 2007.
Single-manager hedge funds experienced the highest level of liquidations, with 155 funds shutting their doors this year. Of these, equity hedge strategies saw the greatest turnover, accounting for over 50% of both launches and liquidations. Macro, the top performing strategy since Q3 2007, accounted for another 20% of launches.
First quarter launches and liquidations occurred against a backdrop in which hedge fund performance has been essentially flat, with the HFRI Fund Weighted HFR Hedge Fund Launches and Liquidations Composite posting a gain of 0.11% for the year through the end of May, and the HFRX Global Hedge Fund Index declining by 0.2% through mid-June.
“Consistent with the theme of lower investor risk tolerance as a result of credit, equity market, and general economic weakness, there has been a decline in new capital commitments to the industry in 2008 and fewer new fund launches,” said Kenneth Heinz, president of Hedge Fund Research. “Investors continue to express a preference for funds with established tracks records and significant infrastructure. As a result, firms with more than $1 billion under management hold nearly 87 percent of total industry assets, a level consistent with recent quarters.”
The peak year for hedge fund launches and liquidations remains 2005, when 2,073 new funds were started and 848 funds were closed down. Both launches and liquidations have trended down steadily since that time, even as industry assets under management have continued to grow, from $1.1 trillion in 2005 to nearly $1.9 trillion currently.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…