The number of hedge fund liquidations dropped to an estimated 102 in the first quarter of 2023 from an estimated 144 in the fourth quarter of 2022.
On the whole, over the trailing 12-month period ended first quarter of 2023, an estimated 340 funds were launched, while 547 funds liquidated.
The investable HFRI 500 Equity Hedge index led strategy gains year to date through the end of May, having gained 1.6%, driven by exposure to technology, artificial intelligence and cryptocurrency, the release added.
In addition, the average industry-wide hedge fund management fee increased by 1 basis point to an estimated 1.36% in the first quarter of 2023 from the fourth quarter of 2022, while the average incentive fee increased by 18 basis points to 16.17% over that same period.
The increase in fees was driven by "strong performance and capital inflows" as well as by "sharp increases in interest rates and generational inflation."
For funds launched in first quarter of 2023, average management fees edged up by 3 basis points to 1.21% from the fourth quarter of 2022.
Average incentive fees for funds launched in first quarter of 2023 were an estimated 18.57%, an increase of 89 basis points from the fourth quarter of 2022.
Kenneth J. Heinz, president of HFR, stated in the release that hedge fund performance and launch trends in recent months have been driven by "market cycles of inflation, interest rates, bank risk, geopolitical tensions, recession fears and technology/AI exposures, which are not only powerful, but comprise competing tensions, impacts and macroeconomic scenarios."
Mr. Heinz also said that the steady level of new fund launches combined with the decrease in liquidations indicates that institutions are "increasing commitment to hedge funds as they seek to pare back high beta equity and illiquid private equity holdings in favor of opportunistic, specialized, defensive portfolio positions."
Strong demand from institutional investors, he noted, has been "focused on defensive portfolio capital preservation, opportunistic exposures through volatile financial turmoil, increasing interest in multistrategy inflation trading teams, and on technology, AI and cryptocurrency exposures."
Mr. Heinz added that institutions are likely to increase their exposures to hedge funds, both established and newly launched, which have "demonstrated their robustness through several recent years of dislocations and intense volatility across the range of asset classes."
