New hedge fund launches surged while liquidations remained steady to begin 2024 according to the latest data from industry tracker HFR.
The estimated number of new hedge fund launches in Q1 2024 surged to 146, an increase of 70% from the prior quarter and the highest level since the first quarter of 2022. The strong start to this year follows a steady growth year in 2023 when an estimated 438 new funds launched.
The number of hedge fund liquidations remained steady to begin 2024, as an estimated 106 funds closed during the quarter, on par with the prior quarter estimate of 104 liquidations. For the full year 2023, an estimated 415 funds liquidated, the lowest level of liquidations since 2004. Launches were led by equity hedge funds in Q1 24, with an estimated 75 new funds opening its doors, representing more than half of the Q1 launches.
Hedge fund fees fell to new historic lows to begin 2024, as managers continued to position for capital growth and inflows from institutional investors throughout 2024. The average industry-wide management fee was unchanged from the prior quarter at an estimated 1.35%, while the average incentive fee fell to at an estimated 15.96%. For funds that launched in Q1 24, the average management fee fell to an estimated 1.17%, while the average incentive fee fell to an estimated 17.17%.
“Geopolitical risk and inflation are likely to define 2024, accelerating trends from 2023 with hedge fund performance and growth trends reflecting expanding interest from institutional investors looking for specialized exposure to these trends with important capital preservation,” said Kenneth J. Heinz, President of HFR. “Managers continued to position for ongoing geopolitical risk driven by ongoing European elections and upcoming US elections, anticipating significant policy shifts and trade impacts, though these risks also include ongoing and potential new military conflicts, with these risks likely to increase throughout 2024. The powerful combination of strong performance, specialized exposures, and capital preservation are likely to drive industry growth throughout 2024.”
