Hedge fund launches slowed in 2007 from 2005-6

NEW YORK, Dec 19 (Reuters) - Hedge fund launches slowed in 2007 for the third year in a row, a sign investors may be putting money into existing funds rather than into new ones with perceived higher risks, an industry research group said on Wednesday.

By the end of the third quarter, 863 funds were launched in the roughly $1.9 trillion industry, compared with 1,518 new funds for all of 2006 and 2,073 launches in 2005, according to Chicago-based Hedge Fund Research.

Liquidations also slowed, with 408 funds closing by the third quarter 2007, compared with 717 for 2006 and 848 for 2005, HFR said.

The research group said the slowing launches and liquidations in an industry with more than 9,000 funds suggests investors are more inclined to allocate to larger, more established hedge funds, which are likely to be more diversified and have better risk controls.

That contrasts with previous years, when investors often clamored to invest in the latest funds, particularly those founded by high-profile former investment bank proprietary traders.

"In the third quarter of this year, investors allocated nearly 90 percent of new capital to funds with greater than $1 billion already under management," said HFR. "Investor requirements for size and infrastructure may be making it more challenging to launch a new fund." (Reporting by Dane Hamilton; Editing by Andre Grenon)