Hedge Fund Startups Rose to Post-Crisis in 2011, HFR says

Hedge fund startups totaled the most last year since 2007 as clients sought alternatives to traditional stock investments, according to a report today by Chicago-based Hedge Fund Research Inc.

The number of new funds climbed to 1,113 last year from 935 in 2010, the most since 1,197 were counted in 2007, HFR said. Most startups last year were equity funds or followed a macro strategy, meaning they bet on global economic trends.

“Investors maintained a strong commitment to hedge funds, and fund managers expanded the scope and breadth of strategies offered, making 2011 the strongest year for new launches since the global financial crisis,” Kenneth Heinz, president of HFR, said in the report.

After posting a record loss of 19 percent in 2008 when the collapse of Lehman Brothers Holdings Inc. hurt financial markets, hedge funds rebounded with two straight years of aggregate gains. Funds declined 5.3 percent in 2011 as the European debt crisis spurred declines in global stocks, according to HFR.

The number of funds that closed last year rose to 775 from 743 in 2010. That compares with a record 1,471 closures in 2008. Funds of funds had 215 closings in 2011, the fewest since 2007, the research firm said.

Investors allocated $70.6 billion to hedge funds in 2011, contributing to total industry assets of $2.01 trillion. Funds rose 5 percent this year through February, according to HFR.

To contact the reporter on this story: Kelly Bit in New York at kbit@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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