In today’s world it’s fair to say launching a hedge fund is not as simple as it once was. Gone are the days of one or two people, in a room with a small amount of their own cash and some more from family and so-called friends, trading away with little or no infrastructure.
Prime brokers were willing to accept them as clients, there were no minimum revenue requirements, and the Regulator was at arm’s length at best, providing light touch regulation. Some of those firms have gone on to become the so-called “Titans” of the hedge fund industry. Winton Capital for example launched from a small office in Kensington in 1997 with $1.6m under management and now manages some $28bn.
What does the landscape look like now? Very different is the answer and it doesn’t appear to be getting any easier for the entrepreneur money manager.
Figures this year show a global trend which has seen the lowest levels of hedge fund launches in the opening quarter of a year since 2004. In fact, more hedge funds managed in Europe closed than opened during 2015 - a first. At the same time however allocations to hedge funds still increase year on year.
So where does the money go? Well typically it goes to the “Titan” managers whose assets under management are in the multiple billions and whose owners frequently feature in the Forbes or Sunday Times Rich Lists.
Yet performance for most of the world’s hedge funds hasn’t been great and some of these managers have succumbed to the pressures of it all, returned capital to outside investors and turned themselves into quasi family offices, essentially running their own monies and those of their partners. This trend is likely to continue for the next few years at least or until the regulatory pendulum swings back, but that does not look likely to happen.