Q3 sees rise in hedge funds launches: HFR

Hedge Fund Research, Inc. (HFR) reported Wednesday the remarkable third quarter rise in the number of hedge fund launches and ascribed it to increased availability of capital and to enhanced investor appetite for riskier assets.

From its report, HFR noted that the launch of 260 new portfolios in the third quarter marks an increase of almost 30 percent from the second quarter total of 201 and around 16 per cent more from the 224 figure of the same quarter last year.

The third quarter also marks the fifth consecutive quarter where hedge fund launches outnumber liquidations. The HFR reported that the 585 shut downs during the first three quarters this year indicates a decrease of 47 per cent from the 858 shutdowns on the same period last year.

Averaging 7 per cent gains through November, returns rose after major hedge funds players incurred losses at the start of the year due to the volatile markets and slow U.S. economic recovery.

With reduced reluctance on alternative assets investment, pension funds and endowments are now keen on stepping into the hedge funds option. This includes the entry into the scene early next year of the state of Wisconsin’s $70 billion pension fund with its planned investment of $1.4 billion.

Increased capital flow fuels the market and enables hedge funds managers to head out on their own. A couple of these are former Citigroup energy trader Andrew Hall who launched this year his Astenbeck Capital and Goldman Sachs alumnus Mark Carhart who launched Kepos Alpha fund.

HFR President Kenneth Heinz noted, "These trends are likely to continue as the hedge fund industry appeals to an increasingly wider, more global and more institutional investor base."

Still, analysts claim that the industry is yet to attain the atmosphere experienced during its peak between 2002 and 2007 when lesser entry restrictions allowed an average of 1,400 funds to be launched each year.