The third quarter saw a spike in both launches of hedge funds and liquidations of existing hedge funds, new data from Hedge Fund Research showed.
New hedge fund launches totaled 269 in the third quarter, up from 252 launches in the second quarter. However, year-to-date launches dropped from the previous year, with 785 in the first three quarters of 2015 compared to 814 launches in the first three quarters of 2014.
Liquidations, meanwhile, increased to 257 in the third quarter, compared to 200 in the second quarter. That was the highest number of liquidations since the first quarter of 2014, when 289 hedge funds were liquidated.
The first three quarters overall saw 674 liquidations, up from 661 liquidations during the first three quarters of 2014.
Kenneth J. Heinz, president of HFR, said in a news release that liquidations rose in the third quarter as a result of a fall in investor risk tolerance and sharp declines in energy commodities and equities. However, he said “many hedge funds which have been conservatively and defensively positioned have posted strong gains for investors,” and that funds that “have demonstrated their value proposition in recent months will continue to attract new investor capital with strong, uncorrelated performance gains in the new year.”
Hedge fund management fees remained unchanged from the previous quarter, at an average of 1.51%. However, the average management fees for hedge funds launched during the quarter averaged 1.68%. The average incentive fees dropped by two basis points from the previous quarter, to 17.76%. The average incentive fees for funds launched during the quarter was 19.29%.
