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From Kirsten Bischoff, Opalesque New York:
The first quarter of 2009 saw the launch of 109 new hedge funds, according to research by HFR. With liquidity constraints and feelings of trepidation about re-entering the space still plaguing most hedge fund investors many of these launches were of small funds. In fact, less than a handful of the hedge fund launches listed on industry databases were targeted to open with over $100m in assets under management.
While smaller funds had a 3% performance bump over larger funds for May 2009 performance, the fact remains that institutional investors still require significant operational structure demands that small managers simply cannot meet, eliminating most from receiving institutional money in the near future.
The next level of assets these launching funds would hope to attract is from the fund of funds. Unfortunately, HFR also reports that the fund of funds portion of the industry is still cycling though a period of losses.
"Liquidations of funds of hedge funds experienced a significant increase in Q1 2009 and accounted for more than half of all closings, with nearly 200 funds-of-funds (FOF) shutting down, a single quarter record. This represented an annual FOF attrition rate of over eight percent, nearly double the previous record set in Q4 2008," reported HFR.
This is likely to mean that small funds that already exist, as well as newly launched funds...................... To view our full article Click here
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