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Alternative Market Briefing

Trends in hedge fund launches and asset raising

Thursday, March 17, 2011

From Kirsten Bischoff, Opalesque New York:

The rate of hedge fund closures has finally been surpassed by the rate of launching funds. New hedge fund launches totaled 935 in 2010, topping each of the prior two years and completing the best year for launches since 2007, when nearly 1,200 new hedge funds launched. (Hedge Fund Research)

“We have seen more startup activity in the past 6 months than we have over the course of the entire past 24 months,” Jack McDonald, President and CEO of hedge fund service provider and prime broker Conifer Securities LLC told Opalesque.

We have a saying, “vision without funding equals wishful thinking,” says McDonald. And perhaps nobody better than new managers realize the expense of launching a fund in 2011. The bar has been raised much higher than it was pre-2008. Investor expectations of fund and firm infrastructures are at an all-time high, with pending regulation likely to increase the expense necessary to be compliant with the any new requirements.

“We are always trying to gauge how well potential clients are prepared to run the business aspect of a fund. There is a lot of help we can give to managers in the early stages, but they still need to realize that they are ultimately signing up to run a business,” says McDonald. “The alternative is to join an existing fund, where one will be paid for individual performance. For those who do wa......................

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