Corporations have cash in the till; and it is sitting up, begging to be put to work. Thus, M&A deals are on the way.
Acceleration Capital Group says that there were 1,113 new hedge funds in 2011 (and 775 funds liquidated). The increase in the number of supplicants has coincided with a 'decline in [the] traditional seed capital currently deployed by fewer dedicated seeders.'
It's the new asset manager's chicken/egg syndrome. You need a track record to get AUM, but you need AUM to get a track record. What's a new manager to do?
Funds of funds dominate the world of institutional investors in Day 1 or early stage (D1/ES) hedge funds, and they do so for a simple reason. That is their business model. They exist to invest in hedge funds, and their goal is to be fully invested at all times, not to have a lot of money sitting around as cash.