In Q3 2018, 79 new hedge funds were established globally, the majority (81%) of which are single-manager funds. Following two successive quarters of contributing a healthy 6% of total launch activity, funds of hedge funds represented only 1% of launches in Q3 2018. Europe accounted for 39% of fund launches, only five percentage points behind North America, as seen in the chart below. Man Group and Winton Capital Management, two of Europe’s largest hedge fund managers, were among those launching new funds. Funds launched by Asia-Pacific-based managers increased from 9% last quarter to 15% in Q3.
Among institutional investors surveyed by Preqin in H2 2018, 28% believe Asia-Pacific presents the best opportunities for the next 12 months. Funds focused on the Far East have seen a surge in launch activity in Q3 2018, despite the Preqin All-Asia-Pacific Hedge Fund benchmark returning -3.02% YTD. Managers are backing the region to provide opportunities in the future, with 18% of launches in Q3 pursuing a core Asia-Pacific focus. With Brexit deadline day looming over the UK and EU, the proportion of launches focused on Europe continues to grow as managers prepare to take advantage of a changing landscape.
Entering 2018, a greater proportion of surveyed investors were looking to decrease rather than increase their allocation to equity strategies (16% vs. 14%). However, Q3 2018 has recorded much activity for the strategy: nearly half of launches were attributed to equity strategies. Conversely, macro and credit strategies – both favoured by investors coming into 2018 – have fallen short of the launch levels experienced earlier in the year.
Niche strategies have seen a resurgence in launches equal to the level at the end of 2017, with cryptocurrency hedge funds representing 60% of all niche strategies launches.
To download the Preqin Quarterly Update: Hedge Funds, Q3 2018 please click here.