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Hedge fund industry adds an average of 4.5 new funds per day in 1Q 2011

Thursday, June 16, 2011
Opalesque Industry Update – There was an average of 4.5 hedge fund launches every business day during the first quarter of 2011, according to research by HFR. The firm’s Market Microstructure report on the hedge fund industry revealed that there were 298 launches in the first quarter, as hedge fund assets passed the $2tln mark for the first time.

However, the firm also reported that liquidations were also at a 12-month high as 181 funds closed in the first quarter, bringing the 12-month total of liquidations to 684 funds.

Fees – the other industry trend
Hedge fund fees, which have reportedly been under pressure since the global financial crisis struck, have fallen in the case of management fees. HFR reports that they saw the sixth consecutive quarter decline for what is typically thought of as the “20” in 2 and 20 fees. Average incentive fees are now 18.85%. Management fees have remained constant at 1.58% over the past few months, but climbed to 1.67% in 1Q2011.

It is possible the rising management fee may be indicative of the expenses being faced by funds as they seek to build out the institutional quality infrastructures that more investors are demanding in return for allocations. “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,” Kenneth J Heinz, President of HFR said 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.



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