By Nell Mackenzie
LONDON (Reuters) -New hedge fund launches will ‘likely’ end the year at their lowest in 24 years amid tough fundraising conditions, hedge fund research firm Preqin said on Wednesday, based on numbers from the first three quarters of this year.
By the third quarter of 2024, hedge fund managers opened 123 new funds, the lowest number since at least 2000 when total launches reached 191, Preqin said. Hedge fund debuts peaked at 697 in 2017, according to its data.
Most of this year’s new funds aim to trade stocks, said the research firm.
The low level of launches globally is down to tougher fundraising conditions in the U.S. and Europe and stiffer internal regulation in China, said Preqin.
Survey data that Preqin collected for a report in November showed that 40% of managers said fundraising was more challenging in 2024 than 2023. Another 40% said nothing had changed since 2023 but that fundraising was difficult then, too, said Preqin.
The number of new niche funds such as those trading insurance linked securities and cryptocurrencies has more than doubled over the past five years, from 730 in 2019 to 1,570 in 2024, said Preqin.
Multi-strategy fund launches grew at an annual rate of 4% since 2017 to the end of the third quarter in 2024, said Preqin.
Fund closures in the first nine months of 2024 also fell to their lowest in a decade, said Preqin.
The hedge fund industry generally has grown in terms of one of its more closely watched metrics — assets under management or (AUM).
However this number includes leverage, investor money as well as any trading positions that have increased in value.
Hedge fund’s performance has been the prime driver of AUM growth, in 2024 so far, said Preqin’s report.
Net cash distributions from hedge funds giving investors back their money totalled $8.4 billion in the 12 months to the end of September. However, in the third quarter of 2024, hedge funds took in a net $25.5 billion of new investor money, said the report.
The industry as a whole averaged a 10% return on investment to the end of September, said Preqin.
(Reporting by Nell Mackenzie; Editing by Amanda Cooper and Dhara Ranasinghe, Editing by Louise Heavens)
