Large hedge fund launches \"declined 26 per cent in 2008\"

Date: Friday, February 6, 2009
Author: Hedgeweek.com

Assets for large new hedge fund launches declined significantly in the US in 2008 as hedge funds suffered their worst-ever year for performance, a survey has found.

The survey, conducted by Absolute Return magazine, found that the largest new fund launches in the US in 2008 amassed a combined USD23.17bn under management, compared with USD31.5bn for the largest new funds in 2007 and USD31bn in 2006.

Only 35 new funds launched with more than USD50m in the first half of last year, attracting a combined USD19.5bn, including USD8.1bn for two new funds set up by Goldman Sachs.

The remaining USD11.4bn accumulated up to the end of June 2008 was well below the USD14bn in launch assets for the 72 funds formed during the first half of 2007.

The number of new vehicles was also down, with only 55 funds managing launches that amassed USD50m by year-end, compared with 81 funds in the previous year.

Six funds raised more than USD1bn, compared with eight in 2007, including Appaloosa Management's Thoroughbred fund with USD1.9bn, Lone Pine Capital's Lone Dragon emerging markets fund with USD1.8bn and Highliner Investment Group's USD1bn equity market neutral Alyeska fund.

'With these results, it's no surprise that 2008 is being dubbed hedge funds' worst year,' says Carolyn Sargent, deputy editor of Absolute Return. 'Turbulent markets, big losses, fund closures and the Madoff scandal have put investor loyalty to the test. Most investors are staying on the sideline, but those who are allocating capital can demand more favourable investment terms.

'In terms of new fundraising, macro strategies and commodity trading advisers are now popular, as they both did well last year and have proved again to be non-correlated to broader markets and other hedge fund strategies.'