Emerging hedge fund managers have led industry performance over the past year, says HFR

Emerging hedge fund managers have led industry performance over the past year, as equity markets have extended gains, investor risk tolerance has escalated and total hedge fund capital has increased to a record level. Emerging hedge fund managers with a track record of less than two years have posted an average gain of +11.3 percent in the trailing 12 months ending 2Q14, topping the gain of +9.1 percent for the HFRI Fund Weighted Composite, as reported in the latest HFR® Market Microstructure Industry Report. The HFRI Diversity Index, comprised of hedge funds owned by women and ethnic minorities, has gained +11.1 percent over the same period.

Launches and liquidations

New hedge fund launches totaled 285 in the second quarter of 2014, in line with both 289 from the first quarter and 288 from the second quarter of 2013. Launches for the trailing 12 months totaled approximately 1,050 funds, slightly below calendar year totals from the past three years.

Hedge fund liquidations declined to 189 in the second quarter of 2014 from 272 in the prior quarter; liquidations in the trailing 12 months totaled 979 funds, exceeding the liquidations in each of the prior four calendar years and the highest since 2009, following the financial crisis.

Fees

...The average management fee industry wide charged by hedge funds in 2Q was 1.52 percent, unchanged from the prior quarter, although management fees have declined 2 basis points from 1.54 percent since 2Q13. The average incentive fee charged by hedge funds in 2Q declined 3 basis points to 17.96 from the prior quarter.

Fee data was mixed for the vintage of funds launched in the second quarter, with average management fee of 1.51 percent, falling from the first quarter of 2014, but in line the FY 2013 launch average of 1.52 percent. Incentive fees for new 2Q launches averaged 17.6 p......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.