New data on hedge fund launches may be worse (or better) than first meets the eye
Jul 30th, 2008 | Filed under: Hedge Fund Industry Trends
New data released this week shows that Europeans just aren’t launching hedge funds like they used to. Reuters reports that European hedge fund launches are at their lowest level since 2002. As Reuters points out, the first half tally of 106 launches is the worst since the first half of 2002 when only 84 funds were launched in Europe. (2002, Reuters reminds us, was in the middle of a bear market).
But hold the phone. Expressed as a percentage of the overall hedge fund industry, the 2008 number has got to be way lower than the previous 2002 low, doesn’t it? After all, growth during the intervening years has dramatically increased the size of the industry.
In December 2007, we told you about a report by the European Central Bank than included the chart at the right. As you can see, global hedge fund launches amounted to about 20% of the industry from 1998 to 2004. Then in 2005 things started to change (although some databases indicated that 2005 was also a strong year for new funds).
Curiously, this drop in launches didn’t coincide with a “bear market”. While ‘05 was described by some as a “disappointing year” for hedge fund returns, the drop in growth rates was likely also a result of the maturation and sheer size of the industry by that point.
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