Hedge fund launches totaled 264 in Q1 2015 bringing the total number of hedge funds globally to 10,149, according to the latest HFR Market Microstructure Industry Report, released by HFR, the New York based data provider on the indexation, analysis and research of the global hedge fund industry.
Total hedge fund capital increased to $2.94trn (€2.6trn) in Q1, while the HFRI Fund Weighted Composite Index and HFRI Equity Hedge Index posted gains of +3.9 and +5.0% YTD through May, respectively, topping the performance of both the S&P 500 and DJIA over that time period.
Launches were led by the Equity Hedge strategy with 142 new funds, representing 54% of all new funds launched.
Industry-wide, Equity Hedge represents 37.7% of all hedge funds, making it the largest single strategy area by number of funds, with these managing over $820bn (€725.7bn) of investor capital.
Average management fees industry wide in Q1 increased by three basis points over the prior quarter to 1.54, while average incentive fees declined by 12 basis points to 17.73%. The average management fee for funds launched in Q1 was 1.52%, representing a decline of 5 basis points over the management fees of 2014 launches.
“Hedge fund launches accelerated in early 2015 as total hedge fund capital eclipsed a record level and investor risk tolerance continued to normalize, with launches concentrated in Equity Hedge as institutional investors look to diversify their direct equity market beta into more sophisticated alternative beta,” stated Kenneth J. Heinz, president of HFR.
“The environment to launch new funds continued to be challenging, with mangers balancing increased demands for performance, transparency, liquidity and complex regulation. While allocating to newly launched emerging managers requires investors to bear incremental, firm-specific risk, investors are compensated for these idiosyncratic risks through innovative strategies, access to capacity and dynamic, early stage fund performance.”