Number of New Hedge Funds Up

Number of New Hedge Fund Launches Increases

The number of new hedge funds is increasing finally and that’s great news for the third party marketing industry as more potential clients enter the industry.  With 2,100 hedge funds closed during the credit crisis, few expected a rise in new hedge fund launches this year.  But if new hedge funds continue to launch at this year’s pace, the industry may see the first year since 2005 of annual growth in new fund formations.  Hedge funds appear to be back with renewed investor confidence and new and experienced hedge fund managers ready to try it again.  Hedge fund launches have been consistently falling from 2073 in 2005 to 659 last year but this trend appears to be reversing.

It might also be that funds that had posted huge losses closed down so that the managers could start with fresh records, resetting high-water marks so that they can collect performance bonuses without making up the money lost in 2008.

When Hedge Fund Research unveiled its second-quarter data earlier this month, all eyes were focused on the slowing number of hedge fund liquidations. What was little noticed were the hedge fund launches. Since 2005, they have been falling steadily from a peak of 2073 in 2005 to 659 last year. The slide appeared to be continuing in the first quarter when 148 new hedge funds were launched. But, in the second quarter, 182 new hedge funds were launched, just as the equities markets bottomed.

The rising launches are a “constructive development,” says Ken Heinz president of Chicago-based Hedge Fund Research. “You are continuing to see risk tolerance and risk appetite improving from the historical lows at the end of 2008. ” To be sure, there are still more hedge funds shuttering their doors than opening them, with 292 going out of business in the second quarter alone, according to Hedge Fund Research. But there have been some notable launches.  Source

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Hedge Funds in 2009

Hedge Funds in 2009 | Performance Notes

Here is a short article discussing the potential turn towards positive hedge fund performance for 2009. While this may not happen until 2010 or later I believe the article does bring up a few valid points:

Hedge funds are under fire these days but they are likely to provide good investment opportunities next year, according to a senior figure in the industry.

Mr Christophe Grunig, chief investment officer of Swiss fund Harcourt, told a gathering at Singapore Management University: ‘Until the end of the year, it will be difficult. A strong deleveraging process has taken place, and there are redemptions. ‘But in the medium term, 2009 could be an excellent year. There are huge trading and investment opportunities.’

Mr Grunig said the industry shakeout that is going on will mean less competition so hedge funds would soon no longer have to compete against powerful investment banks. That will lead to more funds being open for investors.

The industry consolidation is reducing the number of hedge funds, making life difficult for smaller operations. ‘There’s a natural selection, survival of the fittest, and there’s a healthy consolidation going on,’ he said. Read more…

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Tags: Hedge Funds in 2009, hedge fund performance 2009, 2009 hedge funds returns, hedge fund performance 2010, 2008 hedge fund performance, returns of hedge funds in 2009 2008