Hedge Fund Launches Plummet as Investor Sentiment Wobbles
Hedge fund managers are launching new funds at the slowest pace in more than decade as a choppy economic environment buffeted by the Trump administration’s evolving policies has left investors unnerved and has exacerbated what was already a difficult fundraising environment.
Only 88 new hedge funds came to market during the first quarter, the slowest quarter for launches since 2020, according to data from Preqin. Another 15 funds launched in April and May, putting the industry on pace to have fewer funds debut this year than the 618 that launched in the second quarter of 2020 at the height of the Covid-19 pandemic.
And emerging managers are the face of the slowdown, with startup managers accounting for just over 40% of all launches this year and only 5 so far in the second quarter.
The fundraising environment for hedge funds has been unfavorable for years, even going back to the global financial crisis, but it has been particularly difficult this year, given the market uncertainty, according to David Goldstein, director of fund services at STP Investment Services.
“One tweet and the markets have a 2% swing,” he said. “There is no manager that can be fully prepared for that. As well as they think they may know the market, they’re not prepared for that.”
Such volatility makes it especially hard for new managers to break through and gain the confidence of investors, Goldstein added.
“[I]nvestors aren’t necessarily prepared to go into a fund that that could be subject to such swings,” he said. “This is based on somebody’s thoughts about tariffs or political instability, whatever the case may be. As good as a manager may be about picking stocks, you just can’t account for that.”
Read more about what David and other subject matter experts had to say in FundFire here.
