Despite soaring returns, starting a hedge fund remains a daunting challenge.
Assets raised by U.S. hedge fund startups fell by 36 per cent last year from the already depressed levels seen in 2008, according to a survey released Tuesday in hedge fund-focused AR magazine, and its online offering at www.absolutereturn-alpha.com.
Newly-minted funds pulled in $14.9-billion (U.S.) in 2009, compared with $23.17-billion in 2008 and $31.5-billion in 2007, according to AR's research. Just two funds pulled in more than $1-billion, a thresehold that five funds broke in 2008.
"There is still a reluctance of investors to part with their money. Moreover, the big issues of 2008 - transparency and liquidity - continue to be major challenges for new funds," said Michelle Celarier, editor of AR, in a press release. "The barriers to entry are also the highest they have ever been and the environment has been particularly challenging for capital raising."
According to AR, the biggest fund launch of the year was a $2.5-billion debut by Soros Fund Management alums Joshua Berkowitz and Marcel Kasumovich at Woodbine Capital Fund, which takes a global macro strategy approach to markets.
The survey also showed that the most popular new strategies that include specialist and niche equity strategies such as those focused on health care, clean technology, climate change and alternative energy. Merger arbitrage is also attracting renewed interest, as the volume of takeovers picks up.