Hedge fund launches in the third quarter of 2022 declined and were described as being at their lowest since the 2008 financial crisis.
HFR, a hedge fund research firm, said that in Q3 last year, a total of 71 new hedge funds were launched, a decline from the estimated 80 launches in the second quarter of the same year.
By comparison, only 56 new funds were launched in the fourth quarter of 2008 at the depths of the global financial crisis.
HFR said inflation and the likelihood of recession were part of the reason for last year’s drop-off
Fund liquidations were lower, however. An estimated 145 hedge funds closed their doors in Q3 last year, down from 156 fund liquidations in Q2.
HFR’s Market Microstructure Report indicated that larger fund managers navigated the uncertain market conditions better than smaller ones, and overall, the HFRI Asset Weighted Composite Index gained +0.5% year-to-date through November.
“Through an unprecedented, intense, and unpredictable environment, both macro funds and larger hedge funds across various strategies have driven industry-wide gains into the final month of 2022,” said Kenneth J. Heinz, president of HFR.
The better performance of larger funds increased the asset concentration among these players, making the conditions hard for new launches.
Volatile markets have contributed to a challenging environment for new and recently launched funds, leading to increased allocations to well-established funds, which were better able to handle the turmoil in 2022, said Heinz.
In the 12 months ending Q3 2022, an estimated 449 new hedge funds were launched, while an estimated 544 funds were liquidated.
The third quarter of the last year also saw hedge fund fees declining to the lowest level since the 2008 financial crisis.
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