Despite strong equity market conditions in the first few months
of the year, new hedge fund launches in Europe remained at
record low levels in the first half of 2013 - testament to the
uncertainty around the regulatory and business environment for
hedge funds created by the EU's incoming AIFMD regime and the
Eurozone's continuing political and economic woes.
According to the latest survey by the EuroHedge data and
research team, just 34 new offshore European hedge funds were
confirmed as having launched in the first six months of this
year - the lowest first-half level since EuroHedge began
tracking the new fund market in 2000.
Collectively, these 34 new funds raised assets of just over
$3 billion - the lowest first-half assets total since the first
half of 2009, when the hedge fund industry was reeling from the
crash of 2008.
In terms of both the number of new funds and the overall
assets raised, the levels are less than one-fifth of those seen
at the peak of the industry's pre-crisis boom. In the first
half of 2007, by contrast, 189 new European hedge funds raised
combined assets of $15.5 billion.
The number of new funds in the first six months to the end of
June shows a further drop on the 37 new funds that launched in
the first half of 2012. Furthermore, it is some 28% lower than
the 47 new hedge funds in Europe that started in the first half
of 2009 - and is also lower than the 41 new funds that launched
in the first half of 2000, when the European industry was in
its very early stages.
In terms of assets raised by the new funds, the figure of
just over $3 billion also marks a further drop from the $3.6
billion figure for the first half of last year - although it
remains well above the asset figure of just $2.1 billion for
new fund launches in the first half of 2009.
The overall figures are improved to some extent if one also
adds in the 20 new onshore hedge funds that have been launched
in Europe under the UCITS format since the start of the year,
raising some $800 million - with the largest new UCITS launch
being the new Odey Swan onshore version of Crispin Odey's
flagship Odey European offshore strategy, which has raised
around $200 million since its launch in March.
But the onshore fund market has also been hit hard by events
and developments in Europe - with the UCITS hedge fund launch
numbers for the first six months of this year comparing poorly
with the first half of 2011, when almost 50 new funds raised
assets of $2.6 billion.
With the controversial AIFM Directive coming into effect
from this month - although final implementation across the EU
is not required until July 2014 - it is not surprising that a
few potential new launches have been held back until that
particular event was out of the way.
But the uncertainty aroused by the new regulatory
environment that will prevail for the alternative asset
management industry as a result of the AIFMD - and the
implications for managers, investors and service providers - is
clearly acting as a further brake on new fund activity in
Europe at what was already a difficult time.
Despite the bleak general backdrop in terms of the absolute
numbers, there are still grounds for optimism: in terms of the
quality of the new funds that are coming through (both in terms
of their investment pedigree and the strength of their
operational set-up); in terms of the accelerating
'second-generation' trend that has been such a driving force in
the US market; and in terms of the ability, through a widening
range of onshore and offshore structures, for managers to
target an ever-increasing range of individual and institutional
That said, no-one in the industry is in any doubt that the
conditions for starting new funds are harsher than at any time
in the past, that the costs of doing business are increasing
inexorably in this ever more institutionalised and
regulation-heavy period, and that the barriers to entry are
rising all the time.
As a result many, if not most, of the bigger new starts
these days are launching with significant anchor, seeding or
strategic partner capital from day one - giving them a degree
of business stability and institutional robustness that was
rarely a feature of new fund launches in the more
entrepreneurial, 'have-a-go' days of old.
The average size of the new funds that are starting remains
at historically high levels - at around $90 million in the
first half of 2013, down a little from the $116 million average
size in H1 2011 but still more than double the $44 million
average for the first half of 2009.
And the dramatically more challenging new fund environment
that has prevailed since the 2008 crunch has clearly raised the
bar to a level where much of the froth of previous years is
gone for good - and where only proven managers and firms with
strong track records and a solid operational framework have any
realistic prospect of raising capital from day one.
In terms of the largest new launches so far this year, only
one - although the largest one - is what might properly be
regarded as a completely new hedge fund operation, as opposed
to a new launch from an existing firm or platform.
That is the Zug-based Argentière multi-strategy
equity relative value and volatility trading operation led by
highly-rated former JP Morgan equity prop trading chief Deepak
Gulati - which attracted initial capital of around $400
million, including a substantial commitment from a US-based
seeder, and whose 20-strong team comprises mainly ex-JP Morgan
Second in size is the high-capacity, low-fee CCP Core Macro
fund launched by Cambridge-based systematic trading firm Cantab
Capital - one of the few stars of a dismal year for CTAs in
2012, but whose fortunes have reversed sharply this year with
its flagship CCP Quantitative fund down by almost 20% in the
first half of the year.
In third place is Canosa - a new London-based global macro
addition to the Stockholm-headquartered Brummer & Partners
operation, led by former Rubicon portfolio managers Tim Attias
and Santiago Alarco.
Fourth is RWC European Focus, the new offshore vehicle for
the activist investing strategy run by the well-regarded former
Hermes team that joined London-based asset manager RWC last
And the last of the five largest launches is the new
Andurand Commodities operation led by former BlueGold founder
Pierre Andurand - a renowned oil and energy derivatives trader
who has made a strikingly strong start with his new firm,
gaining some 30% in its five months to the end of June.
Below this top tier are several other significant
high-quality first-half launches, including: ex-Goldman quant
prop trader George Assaly's Alcova; former Canyon London head
Mans Larsson's Makuria; ex-Deutsche credit trading head Antoine
Cornut's Camares (backed by some prominent seeders); former
Halcyon London head Khing Oei's Eyck; ex-Eton Park partner Ed
Misrahi's Ronit; former GLG manager James Berger's Swiss-based
B1; and Makis Kaketsis' MSK launch, the first spin-out from the
Ivaldi Capital platform.
And the pipeline for the second half of the year is also
filling up with a number of interesting launches. Among those
attracting the interest of investors are: the new equity
trading fund from BlueCrest led by a team of ex-Nomura prop
traders; the CQS equity fund run by ex-SAC and Soros man David
Morant; the Salt Rock global macro operation led by former
Caxton Europe chief Mark Painting; ex-Algebris founder Eric
Halet's new Silvaris global equity launch; former Centaurus
manager Patrick Bierbaum's Zurich-based P Squared event-driven
fund; the Arcade credit operation led by ex-UBS credit prop
trading head Yassir Benjelloun-Touimi; the Idalion macro
spin-out by a former Tudor and Vega team; and ex-Morgan Stanley
principal investing head George Kounelakis' ENA