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New Managers December 2018

BULLETIN: Hedge fund launches decelerate, but still outpace liquidations in 2018 while fees keep compressing, Long/short equities, the most popular and unpopular of all hedge fund strategies this year

 

For 2018 through 3Q, the number of new hedge fund launches narrowly exceeded liquidations by a margin of 450 to 444, according to the HFR Market Microstructure Report.

However, "hedge fund liquidations exceeded launches in 3Q, reversing a four-quarter trend of net growth in the number of funds, with liquidations rising over the prior quarter while launches were essentially flat over 2Q," said a report released by Hedge Fund Research.

Hedge fund closures totaled 174 in the third quarter, compared to 125 in the previous quarter and 137 in third quarter 2017, it said.

The last time hedge fund closures topping launches was in the second quarter 2017 when 222 funds shut down and 180 funds started trading. An estimated 144 funds launched in 3Q18, representing a narrow decline from the prior quarter launch total of 148, but a more precipitous

drop over 3Q17 launches of 190, which was the highest quarterly launch total since 2Q16.

The lowest ever hedge fund management fees

Average hedge fund management fees remained at the lowest level since HFR began publishing these estimates in 2008, while average incentive fees fell from the prior quarter.

Average management fees industry-wide remained unchanged at an estimated 1.43%, while the average incentive fee narrowly fell by -5 bps to 16.93%.

The average management fee for funds launched in the first three quarters of 2018 was 1.30%, essentially unchanged from the 2017 launch average of 1.34%.

The average incentive fee for funds launched in the first three quarters of 2018 was 17.58%, an increase of +61 bps over the calendar year 2017 launch average incentive fee of 16.97%.

As reported previously, HFR estimates that only approximately 30% of all hedge funds currently charge equal to or greater than a "2-and-20" fee structure.

Kenneth J. Heinz, President of HFR pointed out: "Financial market volatility accelerated through......................

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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.
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