U.S. Markets

Record number of hedge funds now operating around world: HFR

BOSTON (Reuters) - Wealthy investors can now choose from a record 10,149 global hedge funds according to industry data released on Friday that show hundreds of new launches but nearly as many liquidations.

During the first three months of 2015, 264 new funds were launched, according to Hedge Fund Research (HFR)data.

The Chicago-based research firm, which tracks performance and players in the secretive industry, also said 217 funds went out of business, marking the largest number of liquidations since the first quarter of 2014. Because they are private, hedge funds are not required to publicly report returns or say anything about their business strategy.

The HFR data show how both newcomers and established firms are racing to roll out new portfolios to satisfy pension funds’, foundations’ and endowments’ growing appetite for alternative investments that aren’t correlated to the stock market.

But they also underscore how tough it is to raise money and be relevant in the $2.94 trillion industry at a time industry analysts say 10 percent of the industry’s firms control 90 percent of its assets.

“The surprising number of hedge funds that have shuttered their doors this year reflects the fact that this is an increasingly difficult business,” said Michael Hennessy, managing director at Morgan Creek Capital Management, which invests with hedge funds. “Fund raising, keeping clients, and complying with burgeoning regulations have all become significantly more burdensome and costly in recent years.”

During the first quarter Patrick McCormack announced plans to shut his firm Tiger Consumer Management. Also TigerShark Management decided to shut down after 14 years in the business.

But there were also high profile launches including former SAC Capital executive Sol Kumin’s Folger Hill Asset Management.

In 2014 HFR reported 1,040 new fund launches and 864 liquidations, less than the previous year when 1,060 new funds launched and 904 went out of business.

Reporting by Svea Herbst-Bayliss; Editing by Diane Craft