Hedge fund launches in the second quarter declined 19% to 245, the lowest level of quarterly fund creation since the fourth quarter of 2010, according to new data released Thursday by Hedge Fund Research, an index creator and industry researcher.
The rate of hedge fund liquidation eased to 192 funds in the second quarter, down 17% from the previous quarter, according to HFR's report. However, the total of 424 fund liquidations in the first half of 2012 exceeded the rate in the first six months last year by 14%.
HFR's analysis showed that average hedge fund management fees were unchanged at 1.57% in the second quarter. However, hedge funds that launched in 2012 prior to June 30 are charging an average management fee of 1.65%.
The average performance fee for all hedge funds in HFR's universe rose by four basis points to 18.76% in the second quarter. Hedge funds that opened in 2012 raised their performance fee 15 basis points to 18.23% compared to 18.08% for new funds that started in 2011, HFR researchers said in a news release about the report.
For all funds, 40% charge management fees from 1.51% to 2%, while 80% apply performance fees of 16% to 20%.
“Despite total hedge fund industry assets rising to a record level of $2.14 trillion in the first half of 2012, the capital raising environment continues to be challenging, particularly for small to midsize funds,” said Kenneth J. Heinz, HFR's president, in a news release.
“Increased certainty about regulation, reporting and marketing, as well as a normalization of investor risk tolerance, is likely to result in more fund launches and improved capital-raising conditions through the second half of the year,” he added.