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Hedge Funds

HFR: Hedge fund launches top closures again but both down in quarter

Hedge fund launches exceeded closures for the third quarter in a row, but the total number of launches was the lowest since the fourth quarter 2016, data from Hedge Fund Research showed.

In the quarter ended March. 31, 158 new hedge funds started trading, down 16.8% from 190 launches the previous quarter and down 16.4% from 189 new funds in the first quarter 2017.

The volume of new hedge fund launches in the quarter ended March 31 was the lowest since the fourth quarter of 2016, when 153 new funds began operations, HFR data showed.

The number of launches during the year ended March 31 was down slightly to 704 funds from 712 funds as of the same date the previous year but was significantly lower — 22.6% — than the 910 launches in the year ended March 31, 2016.

By contrast, analysis of HFR data showed a slowdown in the number of hedge fund liquidations: 145 funds were closed in the three months ended March 31, down 12.7% from 166 closures in the fourth quarter of 2017 and down 44% from 259 shuttered funds in first quarter of 2017.

A comparison of hedge fund liquidations through the year ended March 31 found that the rate of closure was down 34.6% to 670 funds from 1,025 funds in the 12 months ended March 31, 2017, and down 36.4% from 1,053 liquidations in fund closures in the year ended March 31, 2016.

HFR's researchers also reported that hedge fund fees hit their lowest levels since the firm began estimating management and performance fees in 2008.

The estimated average management fee across HFR's full universe of hedge funds fell by 1 basis point to 1.4% in the quarter ended March 31, while the average incentive fee rose 2 basis points to an estimated 17.1%.

Hedge fund industry growth has been "evolving as both fees and liquidity continue to influence investor allocation decisions as investors position (themselves) for challenges associated with ongoing trade uncertainty and expected higher U.S. interest rates," said Kenneth J. Heinz, HFR's president, in a news release Wednesday accompanying the hedge fund launch and liquidation data.