Both new hedge fund launches and liquidations declined through mid-year 2015 as financial market volatility increased and HFRI performance topped equity markets through 1H15.
New hedge fund launches totalled 252 in 2Q15, a narrow decline from 264 in the prior quarter but a slight YoY increase over the 2Q14 launch total of 240 new funds, according to the latest HFR Market Microstructure Report. With a total of 516 funds launched in 1H15, the number of new launches is on pace for its lowest level since 2010. As previously reported by HFR, total global hedge fund capital increased to a record $2.97 trillion through mid-year 2015.
Hedge fund liquidations also fell in 2Q15, dropping to an estimated 200 fund closures, a decline from the 217 liquidations in the prior quarter but a slight YoY increase from the 189 liquidations in 2Q14. The YTD total of 417 liquidations puts this year on pace for the lowest annual number of liquidations since 2011. By strategy, both launches and liquidations were led by Equity Hedge (EH), with 117 new EH launches and 58 liquidations in 2Q15. Fund of Hedge funds continued to experience consolidation, with 24 liquidations and only 10 new launches in 2Q.
Performance dispersion among constituents of the HFRI Indices increased over the prior quarter, as the returns of both the top and bottom decile declined. The top decile of HFRI constituents gained an average of +10.7 per cent in 2Q15, down from a gain of +12.0 per cent in 1Q, while the bottom decile posted an average decline of -10.5 per cent in 2Q, down from an average decline of -7.6 per cent in 1Q. Over the past 4 quarters, performance dispersion of the HFRI has increased over 2014, with the top HFRI decile gaining +30.4 per cent in the last year, up from +27.4 in 2014, while the bottom decile posted an average decline of -22.0 per cent in the trailing 12 months, down from a decline of -19.5 per cent in 2014.
Changes in average hedge fund fees were mixed for the quarter, with average management fees falling while incentive fees increased, both industry-wide and for the vintage of new hedge fund launches. Average management fees industry-wide declined an estimated three basis points (bps) to 1.51 per cent, while incentive fees increased 5 bps to 17.78 per cent. Both management and incentive fees were higher for funds launched in 2Q, with these showing an average management fee of 1.62 per cent and incentive fee of 18.0 per cent.
HFR is pleased to announce the expansion of HFR’s Diversity family of indices with 2 new indices: HFRX Diversity Women Index and HFRI Women Index. Since January 2007, the HFRX Diversity Women Index, comprised of funds owned by women, has posted annualized performance gains of +2.7 per cent. The HFRI Women Index, comprised of funds managed by women, has gained +5.2 per cent annualised since 2007.
“Since 1993, HFR has been the leader in the indexation of hedge funds, including the performance of Emerging and Diversity managers since 2007, and HFR is pleased to expand this important area of research to include hedge funds owned and managed by women,” says Kenneth J Heinz (pictured), President of HFR. “HFR’s leadership in this area is in response to investor and institutional demand, as well as increased interest and a greater awareness of Emerging and Diversity hedge funds. These strategies offer tactical and strategic benefits to investors’ current portfolio of exposures, and comprise an important area of growth for the global hedge fund industry.”