Hedge fund start-ups: Is new talent harder to find?
A survey by Absolute Return magazine indicates that US hedge fund launches slowed in 2006 – the second year of slowdown in a row.
There were 86 launches of hedge funds with $50 million of assets or more, raising $31 billion in 2006. In 2005, there were 91 launches raising more than $34 billion.
"Costs of starting up have increased, and now investors are more choosy and don’t need to bet on a start-up, so everyone is finding it harder to go and hang up a shingle," says Martin Cornish, partner at law firm Katten Muchin Rosenman Cornish in London.
"We’re seeing a lot less people coming through our doors looking to start up," he adds. "A couple of years ago we would see two, three, four groups a week, and now we tend to see one group interested in starting every couple of weeks or so."
Rami Habib is CEO of KTH Fund Management. His firm, part of Kyte Group, helps hedge fund start-ups, principally by investing in the funds, investing capital towards start-up costs, and providing the infrastructure. Habib agrees that the number of successful hedge fund launches is decreasing. "Last year alone we saw more than 250 groups of traders looking for help starting up a fund. That sounds like a lot, but of those we are only working with five to prepare to launch.