Q1 2011 saw the launch of 298 hedge funds as total industry assets surpassed $2 trillion for the first time in history.
According to recently released data from HFR, Q1 and trailing four quarter launch totals reached their highest levels since 2007. Liquidations hit their highest levels in 12 months, with 181 funds closing for an attrition rate of almost 2%.
In the past 12 months, 684 funds have liquidated, resulting in a net increase of 295 total funds in the last year—also the highest since 2007.
The gap between the best- and worst-performing funds continues to narrow, says HFR. The top decile of all funds gained 41.3% on average over the prior 12 months, while the worst-performing funds declined 14.0% on average. The resulting top-bottom dispersement of 55.3% was the lowest since 2005.
The HFRI Fund Weighted Composite Index, HFR’s leading benchmark of global hedge fund industry performance, gained 9.4% in the 12 months ending Q1 2011.
Management fees had been relatively constant at 1.58% but funds launched in the past four quarters have carried an average management fee of 1.67%, according to HFR’s data. On the other hand, incentive fees continued to decline, falling to 18.85% in Q1 2011, down almost 0.5% since Q1 2008. Funds launched in the past 12 months have charged an average incentive fee of 17.2%.
“Recent milestones of hedge fund industry growth have been reached as a result of powerful trends across strategies, service providers and structures, which continue to attract investors,” stated Kenneth J. Heinz, president of HFR. “As the industry continues to appeal to a wider constituency of global investors, more funds are launching to suit specialized investor requirements, preferences, risk tolerance and performance expectations.”