Number of New Hedge Funds Rises

Number of New Hedge Fund Launches Increases

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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How Do I Raise Capital?

How Do I Raise Capital to Launch a Hedge Fund?

Brent Gillett, a partner at the Investment Law Group, has contributed a question and answer series covering the establishment of a hedge fund and laws related to hedge funds.

Question: How do I raise capital to launch the fund?

Answer: Start-ups are typically marketed initially through the manager’s personal network and often through friends and family. It is also possible to raise capital from seed investors who usually require reduced fees, equity in the management company or both in consideration of the seed investment.

Guest author: Brent S. Gillett, partner at the Investment Law Group. To find more information about the Investment Law Group follow this link.

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Hedge Funds Industry Changes

Changes for New Hedge Funds in 2009

The hedge fund industry has obviously gone through some changes after the financial crisis and that change seems to be in the form of smaller and more economical. There is also a lot less of hedge funds opening, with only about a tenth of the 2,000 hedge funds launched in 2005 expected this year.

Hedge funds are drawing investors because limited partners recognize the enormous potential through buying up distressed investments including: “debt, asset-backed securities, and investments taking advantage of the government’s Term Asset-Backed Securities Loan Facility (TALF).” Tom Kreitler of C.P. Eaton Partners explains for funds can capitalize on the market conditions, “Markets are extremely mispriced and inefficient in many areas. There has also been a large reduction in the number of funds; and proprietary trading at the old investment banks, which took out a lot of investment opportunities, has almost ended. Any strategy that uses some asset mix of equities, debt or currencies could succeed given the current dislocation.”

Although more hedge funds are being launched recently, it is still only a small percentage of the funds that were opened only a few years back. But that can be beneficial to the industry because it has been so overcrowded with new hedge funds. These new funds often failed because they were led by inexperienced and inefficient managers. Today, limited partners are more demanding of their managers and less willing to give away capital to untested GPs. This makes fundraising a more difficult job and even experienced managers raise smaller funds than they would have a few years ago.

Funds are also trying to cut costs on everything that does not have to be directly managed by the staff. Outsourcing operation duties to outside firms is expected to be more popular with new hedge funds. New hedge funds can also expect to face a more involved and scrutinizing investor after the scandals that have troubled the industry. Limited partners are less likely to invest with inexperienced managers. “We’re seeing established managers launch additional funds on top of those they already run. We’re also seeing well-known managers from established shops strike out on their own” says Harold Yoon of ING Investment Management’s fund of funds. Yoon also notes, “Managers are being asked about whether they’ve been sued before, their trading backgrounds, and what businesses they’ve run. It sounds mundane, but people who defrauded investors were accused of similar shady behavior in the past.” (Source)

Other challenges facing new hedge funds are the threat of new tougher regulation, limited partners pushing for lower fees, and demands from investors and regulators about the fund’s liquidity.

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Tags: changes in hedge fund industry, hedge fund industry changes, hedge fund industry, hedge funds changes in 2009, new hedge funds, hedge fund launches

New Hedge Funds Launched in 2009

Here is a great video put out by Bloomberg on how hedge funds are being started almost every day. The news caster is quoted as saying that 8 hedge funds are being started in July 2009 which will manage over $2B total. While I’m sure that this reporter is trying to stress that these are not all small hedge fund shops, I can assure you that there are far more than 18 hedge funds launching in July. Capital for these hedge funds is coming from seed capital providers, large banks and institutions looking to benefit from the cyclical nature of the markets. Many of these new funds are using managed accounts to provide banks with more transparency and less liquidity risk. If you are viewing this article via email please click here to watch the embedded video below.

View over 100 videos on hedge funds within our Hedge Fund Video Library.

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New Hedge Funds

As part of our ongoing effort to expand our Hedge Fund Startup Guide please find below a short article excerpt on new hedge funds coming out this year:

Recessions, it is said, are great times to start new businesses. It seems that’s as true for hedge funds as it is for widget manufacturers or high-tech start-ups.

With banking lay-offs and defections at an all-time high, money managers are seeking greener pastures by going it alone. In most cases, they are happy to take a significant decrease in pay for more autonomy. For while it’s true that the hedge fund industry is constantly abounding with new start-ups and the next wannabe George Soros or James Chanos, this time round even those who are accustomed to running billions of big banks’ funds are beginning with as little as a few million dollars.

Take Hari Kumar, a former partner at $11 billion TPG-Axon Capital, a hedge fund giant which he helped found with three other fellow ex-Goldman Sachs prop traders. Along with Julian Smith, also a TPG-Axon employee, Kumar is now setting up a much more scaled-down Singapore-based fund called LionRock Capital. Rather than have to answer to today’s swelling majority of nervous investors however, Kumar has chosen initially just to manage $75 million of capital provided by him and his partners, according to AsiaHedge, a hedge fund industry publication. source

To view additional articles and resources on hedge fund startups please see our Hedge Fund Startup Tools.

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Hedge Fund Startups

Hedge Fund Startups | Where are they?

Hedge fund startups are notoriously hard to track. They often don’t register with databases, comment in the press or even market their strategy until it has reached a certain length of track record. I did some research and have found that those looking for information on starting a hedge fund are still coming from all of the expected places – NYC, NJ, Chicago, Florida, California and Texas.

Here is the map showing the level of interest coming from each city (click the map to view larger version):

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Hedge Fund Startups

Hedge Fund Startups | Where are they?

Hedge fund startups are notoriously hard to track. They often don’t register with databases, comment in the press or even market their strategy until it has reached a certain length of track record. I did some research and have found that those looking for information on starting a hedge fund are still coming from all of the expected places – NYC, NJ, Chicago, Florida, California and Texas.

Here is the map showing the level of interest coming from each city (click the map to view larger version):

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Hedge Fund Startup

Hedge Fund Startup Tools

Due to the number of inquiries I am currently getting from hedge fund startups and emerging hedge fund managers I will releasing a number of related interviews, example documents, marketing tips and case studies which hedge funds with less than $200M/AUM may be interested in using for their businesses. These resources will be displayed here after being published:

1. Start a Hedge Fund | Tips, Tricks Video
2. Top 5 Tips for Starting a Hedge Fund (Part 1 of 2)
3. Top 5 Tips for Starting a Hedge Fund (Part 2 of 2)
4. Hedge Fund Business Plan | Plans For Growth
5. Raising Capital With Tenacity
6. Hedge Fund Marketing Tools
7. Hedge Fund Seeding
8. Hedge Fund Startup Example | Why Start Now?
9. Raising Capital for a Fund Startup
10. Hedge Fund Incubation Services
11. Setup a Hedge Fund
12. Hedge Fund Launch Quotes
13. Hedge Fund Formation | Tips on Forming a Hedge Fund
14. Hedge Fund Startup Event | Manager Needed
15. CHP Designation | Benefits to Hedge Fund Startups
16. Hedge Fund Public Relations
17. Hedge Fund Seed Capital
18. Starting a Hedge Fund | A Sample Timeline
19. How to Start A Hedge Fund
20. Hedge Fund Backers | A List of Capital Sources for Hedge Funds
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22. Hedge Fund Ethics
23. Seed Capital Sources
24. Financial Advisor Marketing
25. Marketing to Institutional Investors
26. Third Party Marketing
27. Types of Hedge Fund Investors
28. The Schism | Marketing Hedge Fund Managers
29. More coming soon…

If you have any specific resource requests please send them over to Richard@HedgeFundGroup.org

To keep updated on these tool releases please subscribe to our Free Daily Hedge Fund Newsletter

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Tags: Hedge Fund Startup Tools, Hedge Fund Startups, New Hedge Funds, New Hedge Fund, Emerging Hedge Fund Managers, Small Hedge Funds, Hedge Funds with Under 100M

Hedge Fund Startup

Hedge Fund Startup Tools

Due to the number of inquiries I am currently getting from hedge fund startups and emerging hedge fund managers I will releasing a number of related interviews, example documents, marketing tips and case studies which hedge funds with less than $200M/AUM may be interested in using for their businesses. These resources will be displayed here after being published:

1. Start a Hedge Fund | Tips, Tricks Video
2. Top 5 Tips for Starting a Hedge Fund (Part 1 of 2)
3. Top 5 Tips for Starting a Hedge Fund (Part 2 of 2)
4. Hedge Fund Business Plan | Plans For Growth
5. Raising Capital With Tenacity
6. Hedge Fund Marketing Tools
7. Hedge Fund Seeding
8. Hedge Fund Startup Example | Why Start Now?
9. Raising Capital for a Fund Startup
10. Hedge Fund Incubation Services
11. Setup a Hedge Fund
12. Hedge Fund Launch Quotes
13. Hedge Fund Formation | Tips on Forming a Hedge Fund
14. Hedge Fund Startup Event | Manager Needed
15. CHA Designation | Benefits to Hedge Fund Startups
16. Hedge Fund Public Relations
17. Hedge Fund Seed Capital
18. Starting a Hedge Fund | A Sample Timeline
19. How to Start A Hedge Fund
20. Hedge Fund Backers | A List of Capital Sources for Hedge Funds
21. Email Newsletter Creation Tool
22. Hedge Fund Ethics
23. Seed Capital Sources
24. Financial Advisor Marketing
25. Marketing to Institutional Investors
26. Third Party Marketing
27. Types of Hedge Fund Investors
28. The Schism | Marketing Hedge Fund Managers
29. More coming soon…

If you have any specific resource requests please send them over to Richard@HedgeFundGroup.org

To keep updated on these tool releases please subscribe to our Free Daily Hedge Fund Newsletter

Related to Hedge Fund Startup Tools:

• Top 52 Most Popular Articles
• Hedge Fund Tracker Tool
• Financial Certification
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Tags: Hedge Fund Startup Tools, Hedge Fund Startups, New Hedge Funds, New Hedge Fund, Emerging Hedge Fund Managers, Small Hedge Funds, Hedge Funds with Under 100M

New Hedge Funds

There are somewhere between 15,000 and 19,000 hedge funds now in existence. Hundreds of new hedge funds are started each year and at least 10,000 are large enough to officially be noted within major databases and formal tracking systems.

“The hedge fund industry remains a very exciting space, and professionals that want to be in an autonomous environment are still very attracted to hedge funds,” says Marc Bender, chief operating officer of EFX Capital.

HFR data indicates that over 900 hedge funds were launched in 2007 alone while around 500 were liquidated. IDD notes that “This compares to 1,518 new funds in 2006 with 717 liquidations, and 2,073 launches and 848 liquidations in 2005, a record year. The pool of hedge funds in the almost-$2 trillion industry is around 10,000.”

“There is a lot of talent in the market now, and it’s a unique time on the Street as professionals are moving around,” says Jeremy Frommer, head of global prime services for RBC Capital Market, adding “managers need capital to get off the ground.”

Personally I believe that there will be hundreds of new hedge funds started every year for the next 7-10 years. Institutions are by and large increasing their allocations to these products and the surveys of the ultra-wealthy and high net worth financial advisers show a strong sense of confidence in increasingly using alternative assets within their portfolios. Soon I will start writing more often on exactly what financial advisers, family offices and institutions look for in hedge funds because if you work in the industry you will probably be interested in working for a hedge fund that is positioned for growth and if you invest in them I hope that you will contribute to the ongoing conversation here within this hedge fund blog and hopefully I will uncover at least one useful resource for you or your clients.

- Richard

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Hedge Fund Launches

Hedge Fund Launches List

I recently found a very useful list of hedge fund launches for 2000-2008. There are much more details on their website but here are the hedge fund manager names and cities where these hedge fund launches took place.

Hedge Fund Launches in 2000

Hedge Fund Launches in 2001

Hedge Fund Launches in 2002

Hedge Fund Launches in 2003

Hedge Fund Launches in 2004

Hedge Fund Launches 2005