Pace of hedge fund launches slows - research firm

Date: Thursday, September 15, 2011
Author: Katya Wachtel, Reuters

* Second-quarter hedge fund launches slows

* Overall, first half was a good one for new funds

NEW YORK, Sept 14 (Reuters) - The number of hedge fund launches slowed in the second quarter and liquidations across the industry increased, according to data released Wednesday by Hedge Fund Research.

There were 280 new fund launches in the second quarter, which fell short of the 298 new funds that entered the market in the first three months of 2011, data showed.

Hedge fund closures also increased slightly to 191 in the second quarter, compared with 181 liquidations in the first three months of the year.

Conditions through June were volatile and that may have contributed to the decline in new launches. But market swings were not as extreme as the ones that have marked the third quarter, in particular August.

Despite the decline in new fund openings in the second quarter, the first half of this year marked the most vibrant six months for new fund launches since 2007, with 578 new funds in total. Hedge fund launches in the first half of 2011 also eclipsed liquidations as industry assets hit a record $2 trillion.

"The first half of 2011 was a strong environment for new hedge fund launches, with the industry on pace to approach the full-year total of nearly 1,200 launches in 2007," said Kenneth Heinz, Hedge Fund Research's president.

A number of highly-anticipated launches occurred in the second quarter, including that of ex-Goldman Sachs Group Inc (GS.N) star trader, Morgan Sze. His Hong Kong-based Azentus Capital began trading in April.

Hedge fund investors entrusted most of their money to so-called macro and relative value strategies in the second quarter, with those funds receiving more than $20 billion of the total $30 billion in new capital allocations to the industry over the same period, according to data.