Fri, Jul 10, 2020
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

New hedge fund launches on the rise for second consecutive quarter

Friday, September 27, 2019
Opalesque Industry Update - New hedge fund launches increased for the second consecutive quarter, with launches through mid-year 2019 on a pace that could see the industry top launches from calendar year 2018.

Launches totaled an estimated 153 in 2Q19, bringing the 1H total to 289 new funds, according to the latest HFR Market Microstructure Report, released today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry.

The 1H19 launches put the industry on pace to top the 561 launches from last year, which represented the lowest annual total for new funds since 2000.

Fund liquidations declined but remained elevated on a calendar year basis, with liquidations falling to 186 funds, down from 213 in 1Q19. 1H19 liquidations totaled 399 funds, the highest annualized pace of liquidations since 1,016 funds closed in 2016.

2Q19 also represents the fourth consecutive quarter in which liquidations exceeded launches, although the net decline of -33 funds in in the industry was smaller than the prior quarter.

The HFRI Fund Weighted Composite Index (FWC) advanced +7.4 percent YTD through August 2019, led by the +9.8 percent gain in the HFRI Macro (Total) Index. The HFRI FWC performance through August represents the highest return in the first eight months of a year since 2000, while the Macro Index performance is the highest over that time frame since 2003.

Hedge fund performance dispersion continued to narrow in 2Q19, as the top decile of HFRI constituent performance (+10.1 percent) declined sharply from the top decile in 1Q19 (+21.1 percent), while the bottom decile of constituents in 2Q (-6.2 percent) was only slightly below the bottom decile in 1Q (-5.8 percent).

The top/bottom dispersion of 16.5 percent in 2Q19 represents a dispersion decline of over 1000 basis points over the 1Q dispersion of 26.9 percent.

The 12-month rolling decile dispersion also narrowed over calendar year 2018, with both top and bottom deciles improving: the top HFRI decile gained +21.9 in the trailing 12 months ending 2Q, while the bottom decile fell -17.4 percent over the same period, implying a dispersion of 39.3 percent and representing a decline of nearly 350 basis points from the FY 2018 performance dispersion of 43.4 percent.

Average hedge fund management fees industry-wide remained at the lowest level since HFR began publishing these estimates in 2008, while the average incentive fee fell slightly from the prior quarter. The average management fee fell by 1 basis point to an estimated 1.40 percent, while the average incentive fee fell narrowly by 10 bps to 16.5 percent.

The estimated average management fee for funds launched in 2Q19 was 1.25 percent, a slight increase of +6 bps from the 1Q launch average of 1.19 percent. The average incentive fee for funds launched in 2Q19 was 15.65, a decline of 225 bps from the 2018 launch average incentive fee of 17.90 percent.

"Early 2019 risk-on trends moderated through mid-year on increased political and economic uncertainty, including Brexit, uncertain trade negotiations, competitive currency devaluations and persistently negative interest rates. As this uncertainly has increased, hedge fund launches have also increased as investors position for additional shifting in macroeconomic and geopolitical financial market environment," stated Kenneth J. Heinz, President of HFR.

"Global fixed income markets maintaining a supply of $16 trillion on negatively yielding bond represents a temporary market disequilibrium and both an opportunity, as well as a risk for hedge funds managers, particularly interest rate-sensitive Macro hedge fund managers," Heinz added.

"As previously noted, the W-shaped financial market environment continues to dominate financial markets, with strong intermediate term trends contributing to strong performance of quantitative trend-following strategies in recent months," said Heinz. "Institutional investors are likely to exhibit increased sensitivity to duration associated with elevated risks resulting from ultra-low or negative interest rates, positioning in both tactical and effectively rate-hedged funds for a sharp adjustment or dislocation which may occur in coming months."

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. Coronavirus crisis: PE industry mulls more realism and longer holding periods[more]

    Laxman Pai, Opalesque Asia: More realism, longer holding periods and an advantage for investors with a long-term focus - these are the main changes that investment managers in the German private equity market expect as a result of the coronavirus crisis. The PE transaction activity is not exp

  2. Multi-strategy hedge funds post double-digit gains, Tiger Global, Coatue score double-digit fund gains in 2020, Lone Pine soars after losses earlier this year, Can Pershing Square's standout year continue?[more]

    Multi-strategy hedge funds post double-digit gains From FT: Large multi-strategy hedge funds have posted double-digit gains for the first half of the year, reversing losses from March, as markets defied the economic downturn brought on by the coronavirus pandemic. Citadel Advisors

  3. Tech: Pandemic boosts digitalisation across the fund industry, The India-China bust up and what it may mean for tech, Machine learning goes global[more]

    Pandemic boosts digitalisation across the fund industry From International Investment: The pandemic has certainly accelerated change and digitalisation in ways that we never imagined, including the funds industry in Luxembourg. Business Continuity Planning and Disaster Recovery Pl

  4. New Launches: Hedge fund Marshall Wace will bet on ESG stocks with new $1bn fund, Stafford Capital raises initial $532m for ninth timberland fund, Nalanda Cap eyes $800m fund, China's Unity Ventures hits first close on US dollar fund[more]

    Hedge fund Marshall Wace will bet on ESG stocks with new $1bn fund From Forbes: Hedge fund Marshall Wace plans to raise $1 billion for a new fund that will invest in stocks with strong environmental, sustainability and governance (ESG) ratings while betting against stocks with poor rating

  5. PPP: Troubled firm Marto Capital asked for PPP money - and got approved, records show, Fallen hedge fund's head among money managers getting PPP relief, Wall Street investors scored emergency government loans amid pandemic, The asset managers approved for PPP money[more]

    Troubled firm Marto Capital asked for PPP money - and got approved, records show From Institutional Investor: Marto Capital - a former wunderkind founded by an ex-Bridgewater Associates star - got approved for emergency funds from the U.S. government, records showed Monday. Katina Stef