Hedge fund launches rose through early 2014 as equity and event-driven hedge funds continued to attract new investors, while total hedge fund capital rose globally to a record $2.7 trillion at the end of the first quarter, according to the latest report from Hedge Fund Research.

Hedge fund launches rose through early 2014 as equity and event-driven hedge funds continued to attract new investors, while total hedge fund capital rose globally to a record $2.7 trillion at the end of the first quarter, according to the latest report from Hedge Fund Research.

Hedge fund launches totaled 289 in the first three months of 2014, up from 244 in the prior quarter and the highest total since 297 funds were launched in the first quarter of 2013. Liquidations totaled 272 for the first quarter, down on the 296 closures in the previous quarter, but still the second highest quarterly liquidation total since the second quarter of 2009.

Equity hedge launches totaled 116 in the first quarter, representing approximately 40 per cent of all launch activity. Event-driven launches increased to 56 for the first quarter, representing nearly 20 per cent of all launches. In comparison, event-driven hedge funds accounted for only 7 per cent of new launches in 2013.

Regionally, hedge fund launches in Europe declined as a percentage of the overall total with 121 in the first quarter, representing 42 per cent of all hedge fund launches. In 2013, 581 European-based funds were launched, nearly 55 per cent of the 1,060 launches in the calendar year.

The HFRI Fund Weighted Composite Index was up +1.07 per cent in the first quarter, following a gain of +9.13 per cent in 2013.

The top decile of hedge funds, as gauged by the HFRI Fund Weighted Composite Index, gained +33.4 per cent in the trailing 12 months at the end of the first quarter - a decline from the +41.6 per cent top decile gain in 2013. The bottom decile declined -18.3 per cent over the same 12-month period, a slight improvement from the -18.9 per cent bottom decile performance for 2013.

Average management fees across the entire hedge fund industry declined 2 basis points from the previous quarter to 1.52 per cent, while average incentive fees fell 28 basis points to 17.99 per cent.

Average management fees charged by the vintage of funds launched in the first quarter rose to 1.57 per cent, up from 1.52 in the prior quarter and 1.42 for all 2013 launches; the average incentive fee charged by funds launched in Q1 2014 was 16.33, a decline of 23 basis points over the prior quarter.

“Hedge fund launch data, led by growth in event-driven funds, demonstrates the underlying strength of the hedge fund industry as invested capital hit record levels in early 2014,” said Kenneth Heinz, president of HFR.

“Unlike the beta-driven gains of 2013, investors are increasingly attracted to funds offering tactical exposure to complex and uncertain geopolitical or macroeconomic situations, inflation protection and exposure to dynamic event-driven, M&A and activist exposures. These powerful trends are likely to continue through mid-year, attracting new investors with competitive fees, favorable liquidity profiles in response to investor demands and strong, uncorrelated performance,” he added.