Hedge funds increase in number amid growing public awareness

The number of hedge funds in existence rose to a five-year high as stock market gains encouraged more investment and the general public became more aware of hedge fund investment in the second quarter of the year, according to industry analysis and consulting firm Hedge Fund Research (HFR).

A total of 288 new hedge funds were launched in the second quarter of this year, an increase from 245 in the same quarter a year ago, HFR says in a press release. At the same time, the number of hedge funds liquidated fell slightly to 190 from 192 a year earlier. The net gain in hedge funds in the second quarter of this year totals 98, up from 53 a year earlier.

The number of hedge funds worldwide has risen to 10,009, the highest level since the global financial crisis five years ago and near the all-time high of 10,233 posted in the second quarter of 2008, HFR says. More than 8,000 of those hedge funds have just one fund manager.

While growing public awareness of hedge funds and global stock market rallies in the second half helped boost hedge funds, easing restrictions on hedge fund advertising in the US will likely add a further boost, HFR says. Starting next week, hedge funds will be allowed to advertise on radio, television and the internet under a recent decision by the SEC. 

‘The easing of marketing restrictions on hedge funds constitutes an important milestone in the progression of alternative investments becoming more accessible to a wider pool of investors and expanding mainstream awareness of the hedge fund industry,’ says Kenneth Heinz, president of HFR. ‘The combination of these and the JOBS Act provisions are likely to contribute to a significant increase in the size, number and scope of hedge fund launches in coming years.’