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
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 investors.
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
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
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 people.
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
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 Capital.