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Hedge Funds

Hedge fund liquidations outpace launches in third quarter

Hedge fund liquidations in the third quarter exceeded launches for the first time in four quarters, according to data released Wednesday by Hedge Fund Research.

Hedge fund closures totaled 174 in the three-month period ended Sept. 30, compared to 125 in the previous quarter and 137 in third quarter 2017.

The last time HFR analysis showed hedge fund closures topping launches was in the second quarter 2017 when 222 funds shut down and 180 funds started trading.

The level of hedge fund launches in the three months ended Sept. 30 was nearly flat, with 144 funds opening for business compared to 148 in the previous quarter. By contrast, 190 new hedge funds started operations in the third quarter of 2017.

Year to date through Sept. 30, the number of hedge fund launches and closures is very close at 450 and 444, respectively.

Overall, comparatively low numbers of hedge fund launches and liquidations in the first three quarters this year suggest a slower pace for both categories in all of 2018 compared to the 735 startups and 784 closures HFR reported in 2017.

Separately, HFR researchers reported the average hedge fund management fee remained at 1.4%, while the average incentive fee industrywide fell 5 basis points to an average 16.9%

"Hedge fund launches have remained steady despite the challenging environment as investors continue the process of rebalancing for the higher-volatility environment, which has defined recent months," said Kenneth J. Heinz, HFR's president, in a news release accompanying the firm's latest research report.

"It is likely that the trends toward funds exhibiting strong performance, lower fees and greater liquidity, as well as continuing interest in risk-parity and risk-premia products, will extend into and drive industry growth in 2019," Mr. Heinz added.