The 2017 Preqin Private Capital Compensation and Employment Review presents the latest data and trends surrounding compensation and employment within the private capital industry, including – for the first-time – a look into these practises for hedge fund managers. New to the 2017 edition, the Review analyzes compensation and employment practices within the hedge fund industry, including annual hedge fund launch activity since 2000 by strategy and manager location, examining the number of new entrants to the market against those already operating.
At the time of the publication in October 2016, Preqin’s Hedge Fund Online had recorded 812 hedge fund launches in the year so far. Of these, 26% were offerings from new fund managers – the first increase in new fund managers’ share in launches since 2008 – which could be a result of the high level of liquidations in 2015 thus leading to former employees of established firms looking to set up their own shop 2016. Two such examples are computer driven: Niten Capital Management and global macro-focused Alpstone Capital. Both firms were founded by former members of BlueCrest Capital, which announced their conversion to a family office at the end of 2015.
Across all strategies in 2016 so far, funds managed by established firms represent the majority of launches; however, new fund managers have been more active in some strategies than others. Niche (43%) and macro (33%) strategies are the only hedge fund strategies to have new managers contribute to at least a third of fund launches in 2016. Established fund managers have favoured credit, event driven and relative value strategies, which represent at least four out of five hedge fund launches in 2016 YTD (as at October), as they look to broaden their product offerings.
Historically, new fund manager launches as a proportion of all hedge fund launches were declining. Only in 2001, 2008 and 2016 did new firms exhibit an increase in their share of launches since the turn of the millennium. With the level of fund launches and liquidations continuing to converge in 2016, it will be interesting to see if we continue to witness a proportional increase in new fund manager launches in 2017.