New Hedge Fund Managers Cut Fees, Favor Investor-Friendly Terms — Evening Brief – 06.02.25 

There is a split in how new hedge fund managers are navigating a challenging fundraising environment. Equity-focused funds are slashing fees and easing investor terms, while non-equity strategies like credit and macro are commanding higher fees and stricter conditions, according to Seward & Kissel’s 2024 New Manager Hedge Fund Study. 

The study, conducted by the U.S. law firm found that 77% of 2024 fund launches pursued equity strategies, up from 74% in 2023. These managers reduced average management fees to 1.38% from 1.48% a year ago to attract capital. Conversely, non-equity funds increased fees from 1.40% to 1.75%. 

“The data suggests non-equity strategies are enjoying greater pricing power in a market that continues to reward diversification and downside protection,” said Nick Miller, partner at Seward & Kissel and lead author of the study. 

Liquidity terms also diverged. Non-equity funds tightened restrictions, with 90% imposing lockups or investor-level gates in 2024, up from 71% in 2023. Equity funds, however, saw a decline in such measures, dropping from 78% to 72%. Across both types, 95% of funds offered quarterly or less frequent liquidity, indicating a shift toward securing longer-term capital. 

Equity funds increasingly used founders classes, rising from 49% in 2023 to 70% in 2024, likely to cover operational costs. Incentive allocation hurdles for equity strategies nearly tripled, from 15% in 2022 to 44% in 2024. Non-equity funds saw a modest increase in founders classes, from 47% to 50%. 

The study also noted a decline in standalone U.S. fund structures, falling from 68% to 55%, suggesting a pivot to global investor bases. “In tough fundraising conditions, new equity fund managers are leaving no stone unturned—cutting fees, launching offshore funds, and leaning more heavily on founders classes,” Miller added.