Sat, Oct 19, 2019
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

HFR: Hedge fund liquidations fall to pre-crisis levels as launches increase in Q4-09, average incentive fees decline

Wednesday, March 10, 2010
Opalesque Industry Update – The number of new hedge fund launches increased in the fourth quarter of 2009, even as the pace of liquidations continued to decline, according to data released today by Hedge Fund Research, Inc., the leading provider of data and analysis of the hedge fund industry.

During Q4 2009, an estimated 230 funds launched while 165 liquidated, continuing the momentum from Q3 09 when launches outpaced liquidations for the first time since the start of the financial crisis. For the FY 2009, liquidations outpaced launches, as over 1,000 funds liquidated, while nearly 800 new funds launched. 2009 was the second consecutive calendar year in which liquidations exceeded launches; in 2008, a record 1,471 funds liquidated while only 659 launched.

Average incentive fees decline, funds employ low leverage
Average incentive fees have declined since the start of the financial crisis, with the decline being more pronounced in Funds of Hedge Funds (FOFs). Incentive fees for single manager funds fell to 19.2 percent (versus 19.34 percent in Q1 08) while FOFs fell to 6.9 percent (versus 8.05 percent in Q1 08). The average incentive fee for funds launched in 2009 was 17.6 percent, 1.6 percent below the broader industry average.

Post-Financial Crisis, hedge funds are characteristically employing low levels of leverage, with approximately 40 percent of single manager funds employing no leverage, while approximately 52 percent utilize leverage between one and two times their investment capital. For futures trading funds, more than three quarters of funds employ less than 20 percent margin to equity ratios.

Top funds average triple digit performance gains
As a function of the volatility and recovery of the last two years, both 2008 and 2009 saw increased dispersion between the best- and the worst-performing funds. The top performing decile (10 percent) of hedge funds returned an average of 100 percent in 2009, while the bottom decile lost an average of16.5 percent. This contrasts with 2008, when the top decile gained 40.9 percent, while the bottom decile lost 62.4 percent. Eighty percent of funds posted positive performance in 2009, while approximately thirty percent were positive in 2008.

In response to institutional investor demand, many hedge funds have also recently launched UCITS III compliant fund vehicles, which adhere to specific risk parameters and allow products approved by a single EU regulator to be distributed throughout the region. HFR estimates that there are now more than 250 UCITS III compliant fund vehicles available, and has included these funds in its HFR Database product.

“The financial crisis and subsequent recovery have impacted and reshaped nearly every aspect of finance, and the process of recovery in still ongoing in the hedge fund industry,” said Ken Heinz, President of Hedge Fund Research Inc. “A number of firms were able to achieve outstanding results in 2009 amidst a very complex economic environment, but the landscape in terms of capital, strategies, service providers, fees, regulation, liquidity and transparency, has evolved significantly. These trends are likely to define the growth of the hedge fund industry in the next decade.”


Hedge Fund Research, Inc. (HFR) is the global leader in the alternative investment industry. Established in 1992, HFR specializes in the areas of indexation and analysis of hedge funds. HFR Database, the most comprehensive resource available for hedge fund investors, includes fund-level detail on historical performance and assets, as well as firm characteristics on both the broadest and most influential hedge fund managers. www.hedgefundresearch.com


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. These hedge funds do better. So why can't they raise more money?[more]

    From Institutional Investor: It's an enduring paradox: hedge funds run by women and minorities outperform their peers - but run less money. Evidence continues to mount that the money investors allocate to minority- and women-controlled hedge funds stands a better than even chance of outperformi

  2. Tech: Quantum computing may be closer than expected with 'game changer' discovery[more]

    From Inverse: While quantum computing has long been an exciting notion for scientists and the public alike, the realization of these technologists has long been on hold. But researchers from the Johns Hopkins University have discovered a material that might just fast-track the creation of these, unt

  3. PE/VC: Private-equity deals depress worker wages, study finds, Thoma Bravo to buy Sophos for $3.9bn, Unicorn valuations are fit to burst, warn investors[more]

    Private-equity deals depress worker wages, study finds From Market Watch: Private-equity deals result in worse pay for workers, and, depending on whether the buyout target was public or not, fewer jobs, according to a newly published study. The study of some 6,000 private-equity de

  4. Tech: When AI invests in AI[more]

    From Forbes: The title of this article might sound farfetched to many readers, but keen students of artificial intelligence (AI) know that this is no longer very far away. Since the advent of computers, capital markets have always been at the forefront of technology. Yes, that's right. You may be wo

  5. Institutional investors in Canada, U.S., and the U.K are warming to responsible investing, says a survey[more]

    Laxman Pai, Opalesque Asia: The use of environmental, social and governance (ESG) principles by institutional investors in Canada, the US, and the UK is rising according to a new survey. RBC Global Asset Management (RBC GAM)'s annual survey on responsible investing trends found that more