ALTERNATIVES

Hedge fund launches in 2015 dominated by equity strategies — report

There were more new equity-oriented U.S. hedge funds launched in 2015 than in prior years, analysis by law firm Seward & Kissel showed.

About 80% hedge funds launched in 2015 employed equity strategies, compared to 73% in 2014 and 65% in 2013, said the latest annual version of The Seward & Kissel New Hedge Fund Study, released Wednesday. About 15% of the remaining new U.S. hedge funds used multistrategy and global macro strategies, and 5% consisted of credit, managed futures and other strategies.

A significant proportion — 64% — of new U.S. hedge funds launched in 2015 started trading with some form of seed capital, compared to 65% of new funds in 2014.

By way of persuading asset owners to invest in their funds, about 35% of new equity U.S. hedge fund managers offered a tiered management fee schedule in 2015 for “founders class” investors with the fee declining in proportion to the size of the investment, the study said. That’s 10 percentage points more than the 2014 rate.

Seward & Kissel researchers found that all of the new U.S. hedge funds in the 2015 universe charged a 20% performance fee, but noted that equity funds charged an average management fee of 1.68%, while funds using other strategies charged 1.56%.

Finally, about 68% of new U.S. hedge fund managers offered investors lower management and performance fees in 2015 in exchange for agreeing to a longer lockup period (more than one year), the study said, compared to 72% of hedge funds launched in 2014.