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Launches Accelerate Amid Slowing Closures

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Stockholm (HedgeNordic) – As global hedge fund assets surpassed the $4 trillion mark last year after falling below $3 billion in early 2020, the hedge fund industry also welcomed more new funds last year since 2017, according to Hedge Fund Research. Hedge fund shut-downs, meanwhile, reached the lowest calendar year total since 2004.

An estimated 614 new hedge funds launched during 2021, the highest calendar year total since 2017, according to Hedge Fund Research. In 2017, an estimated 735 new funds joined the global hedge fund industry. There were 113 hedge fund launches in the fourth quarter alone, down from 175 new funds in the final quarter of 2020. Hedge Fund Research estimates that 527 funds were liquidated last year, the lowest total since 2004, when 296 funds shut down. In the final quarter of 2021, an estimated 117 hedge funds closed down, compared to 151 in the three months ending December 2020.

“New hedge fund launches in 2021 exceeded totals from each of the prior three years, while liquidations fell to the lowest level since 2004, when industry capital was less than a quarter of the current level.”

“New hedge fund launches in 2021 exceeded totals from each of the prior three years, while liquidations fell to the lowest level since 2004, when industry capital was less than a quarter of the current level,” comments Kenneth Heinz, President of Hedge Fund Research. “Strong growth trends continue to be driven by rising geopolitical and macroeconomic uncertainty, with institutional investors positioning for this uncertainty and looking for portfolio capital protections,” he continues. “These concerns from the prior year have only been increased by the early 2022 volatility and expectations for significant interest rate increases.”

“Strong growth trends continue to be driven by rising geopolitical and macroeconomic uncertainty, with institutional investors positioning for this uncertainty and looking for portfolio capital protections.”

After an advance of 9.9 percent in 2021, the investable HFRI 500 Index edged down by 1.2 percent over the volatile first two months of 2022. Uncorrelated macro strategies have led performance so far in 2022 with a year-to-date advance of 3.8 percent through the end of February, reflecting strong gains across fundamental discretionary, commodity and systematic trend-following strategies.

“Powerful risk-off trends and gains across uncorrelated Macro strategies have excelled through the early 2022 volatility, with contributions from commodity, fundamental discretionary and quantitative trend-following,” says Kenneth Heinz. “These strategies have not only navigated the inflation/interest rate-sensitive trends, but also the surging energy prices and military escalation of uncertainty regarding the Russian invasion of Ukraine,” he adds. “As these trends continue to dominate performance through the first quarter, it is likely that both Macro funds and the industry as a whole are likely to attract increased institutional capital flows through mid-2022.”

 

Photo by Susan Q Yin on Unsplash

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Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

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