Data taken from Preqin’s Hedge Fund Analyst shows there were 82 funds launched (221 including related funds and share classes) in Q2 2014. North America-based fund managers continued to dominate the proportion of fund launches, with around 70% of new fund launches. Funds launched by European head-quartered firms accounted for 21% of all launches in Q2 2014, an increase of six percentage points from the previous quarter. The European Union’s Alternative Investment Fund Managers Directive (AIFMD) registration deadline was due on 22nd July 2014, so this shows that managers in the region are becoming more accustomed to the regulatory changes taking place throughout Europe. Preqin’s report Global Hedge Fund Managers Respond to the AIFMD shows that managers from Europe are largely prepared for this regulation, therefore these firms are also now better placed to launch new vehicles.
In regards to the core strategies employed, long/short strategies continue to represent the greatest number of funds launched with 51% of total new funds adopting a long/short strategy. However, we have seen a surge in new funds adopting macro strategies, from 16% in Q1 2014, to 26% in Q2 2014, as fund managers see opportunities to generate alpha in the current global environment. With increased speculation of a rise in interest rates among some global central banks and with quantitative easing in the US coming to the end of its tenure, it may be that we start to see a lot more activity within the macro space. New launches in the macro space include the latest offering by AQR Capital Management, AQR Global Macro Fund, which was launched in April. The fund will follow a systematic macro approach and is structured as an alternative mutual fund. The proportion of funds using a relative value strategy declined from 8% in Q1 2014, to 3% in Q2 2014. Event-driven strategies remained relatively unchanged at 10%.
When looking into the typical management and performance fees of new fund launches, the data indicates that the average management fee of a new fund launch has fallen from the previous quarter where it stood at 1.5%, to 1.36% in Q2 2014. In regards to average performance fees there has been little change, with the average performance fee standing at 18.48% in Q2 2014.
In summary, we are seeing a resurgence in the number of Europe-based funds launched during Q2 2014, with the UK leading the way. Although long/short strategies dominate the hedge fund landscape, we have seen a revival in the macro strategies area as fund managers see increased opportunities to generate returns in the current global climate. This increase in appetite for launching new funds with a macro focus has been coupled with an improvement in the performance of the strategy. As The Q2 2014 Preqin Quarterly Update: Hedge Funds shows, macro strategies topped the strategy benchmarks in Q2 2014, posting their best quarterly returns since Q3 2011. Both fund managers and investors alike will be hoping that the current strong performance of macro strategies will continue, in order to see that their commitment to the strategy is paid off over the rest of the year.