Hedge funds turn around as launches outpace liquidations
The hedge fund industry is growing at a rate that outpaces liquidation in the space for the first time since 2007, according to Hedge Fund Research. The HFR database, which tracks fund-level detail on historical performance and assets, shows 935 new hedge funds launched in 2010, with 220 in the fourth quarter alone. That yearly figure tops each of the prior two years and completes the best year for launches since 2007, HFR said. In comparison, hedge fund liquidations totaled 743 in 2010, the fewest since 2007 and roughly half of the record calendar year liquidation total of 1,471 set in 2008. HFP also monitors fund managers and notes that JPMorgan Chase (JPM) and Goldman Sachs (GS) remain the top prime brokers to the hedge fund industry. In a interview with HousingWire in 2009, Todd Groome, the nonexecutive chairman of trade group Alternative Investment Management Association, anticipated that hedge funds would ramp up funding in order to move into the distressed asset space as major investors. Anecdotal evidence from brokers in the real estate-owned space states that 40% of cash investors are now linked to hedge fund money. Meanwhile, Capital Economics analysts said home prices relative to income are at their lowest levels in U.S. history and could go even lower. "New hedge fund launches and liquidations in 2010 reflect dynamic shifts in the landscape of the hedge fund industry which will define the next decade of industry growth and evolution," said Kenneth Heinz, president of HFR. "The modern hedge fund industry encompasses strategic exposures not only to equity and fixed income markets, but to specialized currency, commodity, inflation protection, energy and securities issuance trends." Citco Fund Services; Schulte, Roth & Zabel; and Pricewaterhouse Coopers were each top hedge fund service providers for administration, legal and auditing, respectively. Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.