Hedge fund launches at highest level since 07, according to HFR

15 Jun, 2012

Hedge fund launches reached levels unseen since 2007 with industry Assets under Management (AuM) rising to a new record of $2.13 trillion, according to the Market Microstructure Industry Report, published by data providers Hedge Fund Research.

There were 304 new fund launches in the first quarter of 2012 although liquidations also increased with 232 funds shutting their doors, the highest quarterly liquidation total since the first quarter of 2010 when 240 funds closed.

The sizeable increase in hedge fund launches is attributable to financial institutions looking to spin out their proprietary trading desks in anticipation of the Volker Rule, which will prohibit such activities, according to Ken Heinz, president of Hedge Fund Research.

However, funds of funds continued to contract with 64 exiting the business – although the embattled sector did see 34 new launches. Nevertheless, this was the fourth consecutive quarterly decline in the number of funds of funds.

Performance dispersion increased with the top decile of all hedge funds averaging a gain of more than 20% in the first quarter while the bottom decile declined by 28%. Fees also rose slightly with the average management and performance fee now set at 1.63% and 17.75% respectively.

J.P. Morgan and Goldman Sachs dominate prime brokerage, according to the findings, holding nearly half of all hedge fund assets globally. Meanwhile, fund administrators BNY Mellon, Citi and GlobeOp all saw their market share increase too.