Hedge fund launches still below their pre-crisis peak
Hedge fund launches and total fund numbers have still not returned to their pre-financial crisis levels, despite the industry posting its best year of returns for a decade in the interim in 2009, figures from Hedge Fund Research show.
Hedge fund launches totaled 1,113 in 2011, against 1,197 funds launched in 2007.
Equity hedge funds, the largest strategy by assets, saw 479 launches in 2011 – the highest number since 2006 – but also 293 portfolio closures.
This was the highest rate of closures for the strategy since 2008, when the industry posted its worst annual performance, of -20% since at least 1990.
Total fund liquidations rose to 775 last year, some 4% more than the previous year’s 743.
Meanwhile, the total number of funds in the $2trn industry rose to 9,523 in 2011.
While healthy, this still fails to eclipse the pre-crisis peak of 10,096 funds, at the end of 2007.
The Eurozone’s sovereign debt crisis is still unsettling markets and making them volatile, and this combined with low risk appetite generally, seem to be keeping launches below their 2007 peak.
Kenneth J. Heinz, HFR president said: “The complexity and breadth of the European debt and currency crisis contributed to a challenging environment for hedge funds in 2011 and, as a result, investors are tactically positioning exposures to provide positive portfolio optionality.”
Another effect of the region’s sovereign debt crisis can be seen in the number of closures and launches of funds managed from Europe versus America.
Europe experienced both more closures and fewer launches than America did last year – a reveral in each case on 2010.