Assets raised by hedge fund startups in 2009 fell 36% to $14.89 billion from $23.17 billion the previous year, marking the second year in a row that new fund assets declined significantly, according to AbsoluteReturn-Alpha.com’s AR magazine. The amount was less than half of the $31.5 billion new hedge funds raised in 2007, and is the lowest on record.
Although 53 funds with at least $50 million in assets launched in 2009, on par with the 55 $50 million-plus hedge funds that opened their doors in 2008, the average size of the funds fell significantly. Further, only two new funds were able to end 2009 with $1 billion or more in assets, whereas in 2008, five $1 billion hedge funds opened for business.
The biggest new hedge fund of 2009 was the $2.5 billion global macro Woodbine Capital Fund, from Soros Fund Management alumni Joshua Berkowitz and Marcel Kasumovich. Already, this fund is nearing $3 billion. The second-biggest launch of 2009 was the $1 billion Roc Capital Partners Fund.
“There is still a reluctance of investors to part with their money,” commented AR Editor Michelle Celarier. “Moreover, the big challenges of 2008—transparency and liquidity—continue to be major challenges for new funds. The barriers to entry are also the highest they have ever been, and the environment has been particularly challenging for capital-raising.”
The most popular hedge fund categories are niche areas, including healthcare, clean technology, climate change, alternative energy and merger arbitrage.