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Hedge Fund Rollouts, Liquidations Fell in First Half

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As financial market volatility increased, both hedge fund launches and liquidations declined through the middle of the year, Hedge Fund Research reported Tuesday.

HFR said 252 new hedge funds rolled out in the second quarter, down slightly from the previous quarter, bringing total first-half launches to 516 funds.

New hedge funds this year are appearing at the slowest pace since 2010, HFR said.

Through the end of the first half, 417 hedge funds had been liquidated, putting 2015 on track for the lowest annual number of liquidations since 2011.

The report said global hedge fund capital stood just shy of $3 trillion at the end of June.

HFR reported earlier this month that its HFRI Fund Weighted Composite Index had outpaced the S&P 500 index by some 400 basis points in August, posting a loss of 1.9% compared the S&P’s loss of 6%.

According to the new report, the equity hedge strategy led both launches and liquidations, with 117 rollouts and 58 liquidations in the second quarter. During the same period, funds of funds continued to experience consolidation, with 24 liquidations and just 10 launches.

HFR said performance dispersion in Q2 among constituents of the HFRI indices increased over the January-to-March period, as the returns of both the top and the bottom decile declined.

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The top decile of HFRI constituents gained an average of 10.7% in Q2, down from a gain of 12% in Q1, while the bottom decile posted an average decline of 10.5% in Q2, compared with an average decline of 7.6% in Q1.

Across the industry, average management fees in the second quarter declined by an estimated three basis points to 1.51%, while incentive fees increased by five points to 17.78%.

For funds launched in the second quarter, both management and incentive fees were higher, with the average management fee at 1.62% and the average incentive fee at 18%.

In its report, HFR also announced the expansion of its Diversity family of indexes with the HFRX Diversity Women Index, comprising funds owned by women, and the HFRI Women Index, representing funds managed by women.

Since January 2007, the former has posted annualized performance gains of 2.7%, and the latter gains of 5.2%.

HFR’s president Kenneth Heinz said investor and institutional demand had prompted the expansion, as had growing interest and awareness of emerging and diversity hedge funds.

“These strategies offer tactical and strategic benefits to investors’ current portfolio of exposures, and comprise an important area of growth for the global hedge fund industry,” Heinz said in a statement.