The pace of new European hedge fund launches slowed in 2007 for the first time in several years, according to EuroHedge, with both the number of funds launched and the combined volume of a
The pace of new European hedge fund launches slowed in 2007 for the first time in several years, according to EuroHedge, with both the number of funds launched and the combined volume of assets raised by the new funds falling in comparison with the previous year.
EuroHedge’s latest annual survey reveals that 370 new European funds started during the calendar year, raising combined assets of USD 33 billion.
The figures show a 12.5% decrease on the 420 new funds that started in 2006 and a 10.8% reduction in the total assets raised compared with 2006, when new funds raised a combined USD 37 billion.
This marks the first time that both the number of new European hedge funds and the assets raised have declined since EuroHedge began conducting its annual survey in 2000, although the assets raised by new funds previously fell in 2001 against 2000.
The decline in new fund-raising activity was most clear in the second half of 2007, where new fund launches slowed significantly in comparison with the second half of 2006 amid the volatile financial market conditions.
By the half-year point in 2007, new fund launches in Europe had actually grown substantially against the first half of 2006 – with USD 15.5 billion raised by 190 new funds (compared with USD 11.4 billion from 170 new funds in the first six months of 2006).
The level of activity tapered off in the second half of 2007 – with 180 new funds in the last six months of the year raising assets of USD 17.5 billion (compared with 250 new funds raising USD 26 billion in the second half of 2006).
‘The volatile and treacherous market conditions in the latter part of 2007 will have played a part in the overall slowdown – with the capital-raising climate in the second half of the year becoming increasingly tough,’ says EuroHedge editor Nick Evans.
‘However, there was still a very significant volume of assets raised overall – and there has been substantial growth in certain strategy areas, such as emerging markets and commodities.’
In terms of individual investment strategies, by far the biggest year-on-year rise in 2007 came in the emerging market equity area. Although the number of new emerging market equity funds was the same as in 2006 – at just over 40 in each year – the assets raised more than doubled in 2007, from USD 2.5 billion to USD 5.1 billion.
Another area of increased activity was in commodity-related strategies – where 2007 saw a significant number of big new launches in the commodity, energy and resources area, raising a total of almost USD 1.3 billion.
