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Flurry of hedge fund start-ups buoys industry

Date: Tuesday, November 3, 2009
Author: Sam Jones, FT.com

Hedge fund launches are growing in size and number after months of subdued activity in the wake of the collapse of Lehman Brothers last year.

The revival of fund start-ups is one of the clearest signs yet that the $1,400bn global hedge fund industry is starting to return to better times.

London-based Tyrus Capital on Monday became the largest fund to launch so far this year. According to people close to the company, investors placed about $800m with it before the cut-off for initial subscriptions closed. The fund is expected to raise a further $300m before the end of the year.

Theleme Partners, set up by Patrick Degorce, the co-founder of The Children’s Investment Fund, also launched on Monday with an estimated $200m under management. In the US, Greenwich-based Pia Capital, set up by ex-Moore Capital trader Christopher Pia, launched with an estimated $300m under management in June.

Although performance and investor inflows have been positive for many funds so far this year, the state of the start-up market – a truer barometer of the industry’s health, had, until such launches, been pallid.

“Where it was common to start with $300m at the height of the boom, $50m was the case earlier this year,” said Patric de Gentile Williams, chief operating officer of FRM Capital Advisors, a provider of seed capital to hedge fund ventures.

Chicago-based Hedge Fund Research estimates that the number of fund launches rose to 182 in the second quarter of 2009 from a low of 148 the previous quarter. Third-quarter figures, out later this month, are expected to show a further rise.

The size of launches was also, until recently, diminished. Data provider Eurohedge estimated that the entire volume of assets raised by all of Europe’s launches in the first half was less than the single largest new fund in 2008, Brevan Howards’ $2.5bn Multi-Strategy Fund.

Now investors are beginning to allocate large tickets to start-ups. RWC Partners’ new Absolute Alpha fund launched at the beginning of October with $350m under management and a further $200m expected.