Hedge Fund Launches and Closures Hit Multi-Year Lows

Stockholm (HedgeNordic) – New hedge fund launches slipped to an 18-year low last year, but closures hit a multi-year low too. According to data provider Hedge Fund Research (HFR), an estimated 561 hedge funds launched globally last year, whereas 659 funds closed their doors during the year.

Last year’s number of hedge fund debuts was the lowest figure since 2000 when less than 400 funds opened up. Hedge fund closures, meanwhile, peaked in 2008 when close to 1,500 funds shut their doors. The number of closures for 2018 was the lowest annual figure since 2007 when less than 600 funds closed.

An estimated 111 new hedge fund launches were registered in the fourth quarter of last year, whereas the number of liquidations reached 215, the highest quarterly figure since the second quarter of 2017. Funds employing macro-focused strategies accounted for most of the fourth quarter’s new launches. Of the 111 rookies, 50 vehicles use macro strategies. Macro-focused funds also accounted for the highest portion of liquidations in the fourth quarter. Of the 215 closures registered during the quarter, 60 employed macro strategies.

The final quarter of 2018 was the second consecutive three-month period with more closures than openings, with the industry seeing a decrease of 134 in the number of up and running hedge funds in the second half of the year. According to HFR’s president, Kenneth J. Heinz, “a steep drop in investor risk tolerance as financial market volatility surged in Q4 inhibited hedge fund launches into year end, resulted in the lowest quarterly launch total since Q4 2008 and lowest annual launch total since 2000.”

“While investor risk appetite has returned in early 2019, the environment remains challenging for new fund launches, with increasingly institutional capital sources indicating preference for established funds, new launches by established firms or demonstrated performance track record combined with rising investor capital bases,” he adds.

In contrast to the global hedge fund industry, new hedge fund launches in the Nordics outnumbered the high number of closures last year. 15 constituents of the Nordic Hedge Index closed doors or merged into other funds during the course of 2018. Of the 172 current members of the index, 21 were launched in 2018, the highest number of launches on record.

 

Picture © Sergey-Nivens—shutterstock.com

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Eugeniu Guzun

Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index (NHX), as well as being a novice columnist covering the Nordic hedge fund industry for HedgeNordic. Prior to joining HedgeNordic, Eugeniu had served as a columnist for a U.S. journal covering insider trading activity, activist campaigns and hedge fund moves. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018.

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