20/06/2011
Creation of new hedge funds at a three-year high
According to estimates from Hedge Fund Research (HFR), new hedge fund launches in first quarter 2011 and in the four quarters to the end of March were at their highest levels since 2007. The “Market Microstructure hedge fund industry report” finds that 298 funds were created in January-March, which represents a launch rate of 3.3%, while total assets for the first time totalled over USD2trn.However, liquidations were also higher in the past 12 months, with 181 funds closing in January-March, representing an attrition rate of nearly 2%. In the 12 months to the end of March, 684 funds have been liquidated, while net creations of new funds in the same period totalled 295, also the highest since 2007.In terms of performance, the dispersion has continued to narrow in first quarter, with a difference of 55.3 percentage points between the top decile (+41.3%) and the bottom decile (-14%) over the past twelve months. This difference is the smallest observed since 2005, and is half of what it was in 2009 (116 percentage points). In the twelve months to the end of March, the HFRI Fund Weighted Composite Index rose 9.4%.An analysis of fee structures shows a divergence between management and incentive commissions. On average, management commissions have remained unchanged, at 1.58% (see Newsmanagers of 4 March), but rose to 1.67% for funds launched in the past four quarters. Meanwhile, incentive commissions fell in first quarter to 18.85%, compared with 18.95% in October-December. They have fallen by nearly 50 basis points since first quarter 2008, and data supplied by funds launched in the past twelve months reveal that the trend has continued, with a rate down to an average of 17.2%.
