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Hedge-Fund Startup Assets Declined 36% in 2009

Date: Wednesday, February 3, 2010
Author: Tomoko Yamazaki, Bloomberg

Assets raised by hedge-fund startups in 2009 fell 36 percent to $15 billion from the previous year, the lowest figure on record, a survey by AR magazine showed.

The startups that raised the most money from investors were Woodbine Capital Fund, Roc Capital Partners Fund and Pia Macro Fund, according to an e-mailed statement of the biannual AR New Funds Survey published in the February issue of AR magazine.

Analysts and managers left major financial institutions or global hedge funds and started their own firms last year to capitalize on investment opportunities in the wake of the worst market rout since the Great Depression. Capital raising has been difficult as risk-averse investors remained reluctant to put money in the funds, which posted record losses in 2008, said AR.

“While we’re seeing a recovery in the overall hedge-fund industry, capital-raising for hedge funds continues to be a challenge,” said Hideki Hashiguchi, chairman of the Japan chapter of the Alternative Investment Management Association in Tokyo. “Especially for start-ups, investors want to monitor track records, transparency and capabilities. Those that have a proven record have a pretty good chance of attracting money.”

A total of 53 funds with at least $50 million in assets started by year-end, compared with 55 such funds in 2008, the survey said. Only two new funds were able to end 2009 with more than $1 billion in assets, compared with five startup funds managing that amount in the preceding year, it said.

‘Major Challenges’

“There is still a reluctance of investors to part with their money,” Michelle Celarier, editor of AR, said in the statement. “Moreover, the big issues of 2008 -- transparency and liquidity -- continue to be major challenges for new funds.”

New strategies that are getting attention from investors include specialist and niche equity, such as those focused on health care, clean technology, climate change and alternative energy, the AR survey said. Strategies taking advantage of merger activities also are attracting attention, coinciding with the increase of merger and acquisitions, it said.

Soros Fund Management alumni Joshua Berkowitz and Marcel Kasumovich had the biggest new fund of the year with Woodbine Capital Fund, which employs a so-called global macro strategy, wagering on trends in stocks, bonds and currencies worldwide, the survey said. The fund started at the end of 2008 and began taking outside capital last year. It had assets of $2.5 billion last year, the magazine said.

Roc Capital

Arvind Raghunathan’s Roc Capital Partners Fund, a global equity fund, was the second-largest startup in 2009, managing $1 billion, the survey said.

Hedge funds recovered from their record losses in 2008 as stimulus packages by governments around the globe helped stock and bond markets rebound. The Eurekahedge Hedge Fund Index rose 19 percent last year, after posting a record 11 percent loss in 2008.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net