Tuesday, January 31, 2023

Hedge fund launches lagging private markets


  • Private equity and venture launches running hotter than hedge
  • But more signs of long/short optimism despite returns
  • EisnerAmper survey in New York highlighted ESG data concerns

Three-quarters of private equity and venture capital firms have fundraised or launched a fund in the past six months, compared to 44% of hedge fund managers, new data suggests.

The greater pace of launch activity partly reflects the structure of those industries, but is another sign hedge fund start-up activity has slowed this year. 

New hedge fund launch numbers declined in the volatile second quarter to levels last seen during the financial crisis of 2008, as market volatility delays plans and dents investor appetite, according to Hedge Fund Research.

Volatility has put back launch plans across alternatives this year.

Of planned launches in PE and venture this year, 30% have been delayed compared to 11% in hedge, according to attendees canvassed at an alternatives event hosted by advisory and accounting firm EisnerAmper in New York this month.

There is more optimism surrounding long/short equity, despite weaker performance this year, with two high-profile short-selling launches coming to market.

Forty-two percent of hedge fund managers expect LPs to increase investment in long/short equity and global in the next 12 months, beating event-driven (33%), credit (29%) and quant (19%).

In other findings, 12% of hedge funds said they were using artificial intelligence and machine learning in their investment process, up from 5% last year. 

The lack of standardised reporting and data sets was chosen as the biggest barrier to implementing ESG, highlighted by 45% of respondents.