New hedge fund managers are slashing fees and offering more investor-friendly terms in an increasingly difficult fundraising climate – unless they’re launching non-equity strategies, according to Seward & Kissel’s 2024 New Manager Hedge Fund Study.
The study, released this week by the US law firm known for its extensive work in the private funds space, shows a growing bifurcation in the launch terms of equity versus non-equity funds. While 77% of the funds launched in 2024 followed equity-related strategies – up from 74% in 2023—those managers were more likely to cut fees and reduce investor restrictions to attract capital.
Average standard management fees for equity-focused new launches fell to 1.38%, down from 1.48% a year earlier. Meanwhile, funds deploying non-equity strategies such as credit or macro bucked the trend, raising average fees from 1.40% to 1.75% year-over-year.
“The data suggests non-equity strategies are enjoying greater pricing power in a market that continues to reward diversification and downside protection,” said Nick Miller, partner at Seward & Kissel and lead author of the study.
Liquidity terms also reflected the shifting investor dynamics. Non-equity funds were more likely to impose lock-ups or investor-level gates—rising from 71% in 2023 to 90% in 2024. By contrast, only 72% of equity funds included such restrictions, down from 78% last year.
Still, managers across both strategy types are trending toward more stable capital. The share of funds—both equity and non-equity—offering quarterly or less frequent liquidity hit 95% in 2024, signalling increased manager success in securing longer-term investor commitments.
The study also found a sharp rise in the use of founders classes among equity funds, jumping from 49% in 2023 to 70% this year. This may reflect managers’ increasing need for upfront capital to offset operational costs, Miller noted.
In addition the study revealed a near-tripling in the use of incentive allocation hurdles among equity strategies, rising from 15% in 2022 to 44% in 2024, as well as a decline in standalone U.S. fund structures, with their share falling from 68% to 55%, suggesting growing interest in global investor bases, and a modest increase in founders classes among non-equity funds, from 47% to 50%.
“In tough fundraising conditions, new equity fund managers are leaving no stone unturned—cutting fees, launching offshore funds, and leaning more heavily on founders classes,” Miller said.
