Hedge Fund Startup Funding
Hedge Fund Startups Reel in $12.4B since 2009
Newly started hedge funds received $12.4 billion in deposits from 2009 through 2011 from investors that believe many managers perform best during their early years, according to a Citigroup Inc. (C) report.
Funds within their first year of existence received the allocations from 78 global investors during the three years, according to a Citi Prime Finance report being released today. Citigroup surveyed 90 global investors with $368 billion in assets, including funds of funds, family offices, private banks and endowments, according to Sandy Kaul, head of U.S. operations for the New York-based company’s business advisory practice.
“Performance in early years tends to be better,” Kaul said in a telephone interview. “Investors are looking to lock in the capacity with who they think are going to be the next stars.”
The top quartile of small hedge funds, or those with less than $100 million of assets, generated average annual returns of 99 percent from 2001 through 2010, according to an April study published by London-based Barclays Capital. Mid-size firms managing $100 million to $500 million rose 71 percent and the biggest funds gained 60 percent.
The opposite also proved true, with the worst-performing small funds losing 39 percent a year, Barclays said. Big hedge fund laggards had average losses of 28 percent. Source