Hedge funds launches surged in 2011

Tue Mar 13, 2012 4:22pm EDT

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(Reuters) - The number of new hedge funds surged last year to the highest level since 2007, despite one of the most miserable annual performances in the industry's history, according to data released on Tuesday.

The number of new hedge funds totaled 1,113 in 2011, according to fund tracker Hedge Fund Research. While that figure did not eclipse the 1,197 launches in 2007, it was the most openings since the financial crisis.

"Despite performance volatility and macroeconomic uncertainty in the second half of the year, investors maintained a strong commitment to hedge funds," said Kenneth J. Heinz, president of HFR.

In a year when the average hedge fund lost about 5 percent - only the third calendar-year decline for the industry since 1990 - liquidations rose slightly, from 743 in 2010 to 775 in 2011. The S&P 500 index ended the year roughly flat.

Many equity hedge funds, which bet on stock prices rising and falling and lost about 8 percent in 2011, shut down last year. At 293, it was the highest number of closures of that type of fund since 651 in 2008.

Despite those losses, the majority of 2011's launches were in funds that specialize in stocks. With 479 new equity hedge funds, it was the most launches in that strategy since 2006.

Other than equity hedge funds, most new funds launched in the macro space - betting on price moves in equity, currency, interest rate and commodity markets. Such launches totaled 265, the most in that strategy since HFR began keeping track in 1996.

(Reporting By Katya Wachtel; editing by John Wallace)

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