North America-based hedge fund managers accounted for 76 per cent of the 118 new launches in the third quarter, a 12-month high, while both Europe and Asia Pacific-based managers accounted for smaller proportions.
That’s according to Preqin’s latest quarterly update for the industry which reveals that managers in Europe represent 20 per cent of Q3 fund launches, down from 28 per cent the previous quarter, while Asia Pacific-based managers represent just 3 per cent of new vehicles, a quarter of the proportion seen in Q3 2015.
At the same time, the proportion of new funds launched that have a focus on the Asia Pacific region fell from 9 per cent in Q2 to just 1 per cent in Q3, the lowest of any region. Funds with a global focus, however, accounted for 69 per cent of new funds, up from 58 per cent in Q2, while other regions stayed level.
Among leading hedge fund strategies, the level of new hedge funds launched which follow an equities strategy have fallen over the course of the year: 38 per cent of funds launched in Q3 pursue this approach, the third consecutive quarterly decline for the strategy.
Meanwhile, event driven strategies accounted for 21 per cent of launch activity in the quarter, up from 12 per cent in Q2. This growth in the level of event driven funds launched has been coupled with strong returns in 2016 so far; the Preqin All-Event Driven Strategies benchmark has returned 8.27 per cent year-to-date.
Single-manager hedge funds accounted for 86 per cent of new funds launched in Q3 2016, up from 71 per cent the previous quarter. Conversely, UCITS and funds of hedge funds represented 7 per cent and 3 per cent of launch activity respectively, less than half the levels seen in Q2.
Preqin recorded 89 new fund searches through Q3, mainly from Europe- and North America-based investors. Investors based in the Asia-Pacific region accounted for 14 per cent of searches, twice the proportion recorded the previous quarter.
Long/short equity remains the most sought-after strategy in Q3, despite a fall in the proportion of investors searching for the strategy: 43 per cent of fund searches issued in Q3 were for long/short equity, down from 56 per cent in Q2. Long/short credit and CTAs also saw declining search interest, as the proportion of overall search activity including these strategies fell by 19 and 9 percentage points respectively.
“Although the largest proportions of both active funds and new fund launches continue to be those that pursue an equities strategy, there has been a continued decline in the proportion of fund launches using this strategy over the past three quarters,” says Amy Bensted (pictured), head of hedge fund products at Preqin. “According to Preqin’s latest survey of hedge fund managers in June 2016, the largest proportion expect equity strategies to be the worst performing through the year. Despite this, equities funds have registered the highest performance of any leading strategy in Q3 2016, which may spur increased fund launches in the coming quarters.
“Overall, launch activity through the quarter has been dominated by funds run by North America-based managers, as well as funds with a global focus, while Europe- and Asia Pacific-based firms have both accounted for a lower proportion of launch activity. On the part of Europe, this may in part be due to the uncertainty arising as a result of the unexpected Brexit decision in June, while in Asia cautious investor sentiment provides challenges for prospective new funds.”
