(June 17, 2011) — New research by Hedge Fund Research shows that hedge funds are launching at the fastest rate since 2007, with industry assets reaching $2 trillion for the first time.
The research firm found that in the year to March, 298 hedge funds launched, the largest number of launches since before the financial crisis. Meanwhile, liquidations spiked their highest level in 12 months, with 181 funds closing down, representing a failure rate of about 2%.
“Recent milestones of hedge fund industry growth have been reached as a result of powerful trends across strategies, service providers and structures, which continue to attract investors,” said Kenneth J. Heinz, President of HFR, in a statement. “As the industry continues to appeal to a wider constituency of global investors, more funds are launching to suit specialized investor requirements, preferences, risk tolerance and performance expectations.”
The top 10% of hedge funds ranked by performance have made 41.3% over the year to March, while the worst 10% lost 14%. The average fund made 9.4%. The dispersion between best and worst was 55.3%, the smallest gap since 2005. In analyzing fees, HFR found that newer hedge funds are charging higher management fees on average but lower performance fees. Incentive fees at hedge funds, which have long stood at about 20% of profits, have fallen six consecutive quarters, to about 18.85% now.
Furthermore, the firm found that funds-of-funds are still far below their 2007 peak of 2,462, with 2,133 fund of funds operating.
To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742