* Hedge fund launches surge in Q1
* Liquidations also on the rise
BOSTON, June 16 Opening a hedge fund is easier
now than it has been in years, but keeping it open is a lot
tougher, data released on Thursday show.
During the first quarter, 298 new hedge funds opened their
doors for business, the largest number of launches since before
the financial crisis, performance and asset tracker Hedge Fund
In the first quarter of 2010, 254 new hedge funds opened
for business, while 220 opened during the 2010 fourth quarter.
During the January-March period, 181 hedge funds went out
of business, the highest level of liquidations since the first
quarter of 2010, HFR said. In the same quarter a year earlier,
240 funds shut down, while 158 closed during the fourth quarter
The flood of launches early this year was not entirely
unexpected. Many top traders were forced to strike out on their
own in the wake of new financial industry regulations that
limited investment banks' trading operations.
For example, former Goldman Sachs trader Morgan Sze
launched Azentus Capital this year.
Some executives who previously worked at established firms
have also been setting up their own shops, including Patrick
Quinn, formerly of Perry Capital, and Michael Pascutti,
formerly of PIMCO and Citadel.
But as the competition for capital intensifies, it becomes
more difficult to reach the $500 million to $1 billion in
assets thought necessary to make a successful go at running a
fund, investors and analysts said.
Unlike two decades ago, when the industry had only about
820 hedge funds, compared with roughly 9,400 now, pension funds
and endowments have replaced wealthy investors as the
industry's most powerful clients. And their taste for bigger
funds featuring better reporting and easier access to capital
is making it tougher for smaller players to stay in business.
HFR reported that incentive fees at hedge funds, long
hovering around 20 percent of profits, have fallen six
consecutive quarters, to roughly 18.85 now.
Management fees have stayed relatively constant at 1.58
(Reporting by Svea Herbst-Bayliss; editing by John Wallace)