Hedge Fund Launches Declined 36% in 2009

February 2, 2010 (PLANSPONSOR.com) - Assets raised by hedge fund startups in 2009 fell 36% from the previous year, according to the biannual AR New Funds Survey.

The largest new fund launches in the U.S. in 2009 amassed $14.89 billion, in contrast to $23.17 billion for the largest new funds in 2008 and $31.5 billion in 2007, according to a press release.

Although 53 funds with at least $50 million in assets launched by year end, compared with 55 in 2008, the average size of the funds fell significantly.  The number of new funds managing more than $1 billion also decreased, as only two new funds were able to end 2009 with $1 billion or more in assets, compared with five in 2008. 

Woodbine Capital Fund, a global macro strategy that launched at the end of 2008 but only started taking outside capital in 2009, was the biggest new fund of the year, ending 2009 with $2.5 billion and already nearing $3 billion thanks to additional inflows at the start of 2010. Arvind Raghunathan’s Roc Capital Partners Fund was the second-largest launch of the year, ending the year managing $1 billion.

“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 the press release.  “The barriers to entry are also the highest they have ever been and the environment has been particularly challenging for capital raising.”

The survey found new strategies that are getting attention from investors 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 interest as the number of mergers and acquisitions increase. 

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