New European hedge fund launches hit a record high in 2006, as did the overall volume of assets raised by the fledgling funds, according to the latest survey by EuroHedge.
A record 423 new funds launched in Europe, with more than half of these funds appearing in the second half of 2006. Over the year, new funds raised combined assets of $37.8bn, a 36 per cent increase on the $27.8bn raised by new funds in 2005.
Event-driven strategies have doubled in popularity: in total, 27 new event-driven funds were launched, raising just under $8.5bn, a fourfold increase in assets raised compared with 2005.
Global equity also attracted significant attention, with 75 funds debuting and raising just under $5.5bn. Emerging markets in Europe and Asia saw 70 new funds raising combined assets of almost $4bn.
But European long/short equity retained its position as the most popular strategy, with 111 launches in 2006. These funds raised a combined $7.3bn, in line with last year’s figure of 110 European equity funds raising $7.2bn.
Meanwhile, despite poor conditions for fixed-income and macro strategies for much of the year, the volume of new funds held up in both categories. Thirty new macro funds raised just under $2bn, while 21 new fixed-income funds attracted $2.4bn in assets.
The least attractive strategies were convertible and exotic arbitrage and distressed debt, which attracted only 5 funds – less than $500m – between them.
Nicolas Campiche, chief executive at Pictet’s fund management arm, told FT Alphaville he was not surprised by the comparatively poor take-up of convertible arbitrage and distressed debt strategies.
“After the tech bubble burst – that was obviously the height of distressed, but now there are far fewer opportunities in this space,” Mr Campiche said.
However, this situation might change: “There are signs we might be faced with significant corporate difficulties over the next 12 months,” he said. “This will be good for distressed debt.”
But he was less optimistic about the future of convertible arbitrage. “As a strategy, it’s disappearing,” he said. “There’s been almost a meltdown. A lot of the capital in covertible arbitrage has moved away, a lot of funds have disappeared.” Mr Campich cited one billion dollar hedge fund which saw virtually all its capital withdrawn last year, as investors switched to equity long/short strategies. “I don’t think convertible arb will see a lot of capital flow in the longterm,” he said.
Last year’s top ten new European hedge fund launches, with AUM as at Jan 1 2007:
- SRM Global – $3bn (event-driven)
- Cevian Capital II – $2bn (multi-strat)
- Montrica Global Opportunities – $1.1bn (multi-strat)
- Algebris Global Financials – $1.1bn (global equity)
- MKM Longboat Multi-Strategy - $1.1bn
- GSA Capital GMN – $1bn (multi-strat)
- Brevan Howard Equity Strategies – $900m (global equity)
- COMAC – $660m (global macro)
- Lansdowne Emerging Markets – $640m (emerging market equity)
- ZA International – $615m (global equity)