Hedge Fund Launches Rocket Higher in ‘24 — Evening Brief – 07.15.24
The number of new hedge fund launches has risen to its highest level in two years, with equity-focused strategies dominating this year’s climate as global assets topped $4.3 trillion in the first quarter, according to industry tracker Hedge Fund Research.
HFR data revealed that more than 146 new hedge funds were established in the first quarter, marking the highest quarterly figure since the first quarter of 2022 when the number of launches exceeded 185, and a 70% surge compared to the 85 launches observed in the previous quarter.
Equity-focused hedge funds continue to be the largest sub-sector, exerting significant influence in the first quarter with around 75 new launches, HFR said. Meanwhile, during the first three months of 2024, there were 106 hedge fund liquidations, which is consistent with the 104 seen in the previous quarter.
The impressive start to the year followed a consistent increase in launches over the previous year. In 2023, 438 new funds were introduced, which offset around 415 fund liquidations. This marks the lowest number of fund closures since 2004, as reported by HFR.
The average industry-wide hedge fund management fee remained stable quarter on quarter, at an estimated 1.35%, while the average incentive fee decreased to an estimated 15.96%. According to HFR, the average management fee for funds launched in the first quarter was 1.17%, while the average incentive fee decreased to an estimated 17.17%.
The increase in assets can also be attributed to the improvement in performance, as evidenced by the 5.2% growth of HFR’s main Fund Weighted Composite in the first quarter. This growth was driven by the outperformance of large funds compared to smaller and mid-sized firms.
The HFR data indicates the growing competitiveness of the hedge fund industry this year. Jain Global, the much-awaited debut of former Millennium Management co-CIO Bobby Jain, commenced trading on July 1 with $5.3 billion. Although the initial goal of raising approximately $10 billion has been greatly reduced, the firm’s year-long rollout remains the largest hedge fund launch since ExodusPoint Capital Management began managing funds in 2018.
Two other Millennium alumni have announced separate debuts. Taula Capital, a macro and fixed income relative value hedge fund run by former Millennium portfolio manager Diego Megia, raised $5 billion in June. According to Reuters, former Millennium Asia-Pacific co-CEO Jonathan Xiong launched Arrowpoint Investment Partners in Singapore in February with approximately $1 billion in funding, including financing from Blackstone.