The pace of new hedge funds picked up late in 2009, with 173 new funds opening their doors in the third quarter, versus just 42 in the last three months of 2008, reports the Wall Street Journal, citing data from Hedge Fund Research Inc. in Chicago.
Investor confidence is returning a bit more slowly, though, meaning that managers are raising relatively smaller amounts of cash and must also grant concessions on key terms, such as compensation. The traditional “2 and 20” remains the benchmark for managers with a well established track record. But some lesser-known managers are offering fee breaks to attract capital.
The uptick in new funds underscores an overall resurgence in 2009 for the hedge fund industry. Hedge fund returned an average of 19 percent for 2009, which compares favorably with an 18 percent rise for the Dow and 21 percent rise for the S&P 500. While still off its peak size in 2007, going into 2010, investment gains and fresh inflows have boosted industry wide assets to about $1.5 trillion, according to Hedge Fund Research.
The third quarter of 2009 was the first quarter with positive cash inflows in over a year. Pension funds, foundations and other large investors are once again warming to the idea of investing with hedge funds, possibly setting the stage for continued growth in 2010. These investors tend favor mid-sized and bigger funds with established track records, according to the Journal article. So these funds would be prime targets for your hedge fund job search this spring.