For more than 75 years, Seward & Kissel has advised the investment management industry, providing clients with insights into the evolving private funds market. As part of that commitment, we are excited to announce the 2025 edition of the annual Seward & Kissel New Manager Hedge Fund Study, which examines hedge funds launched in 2025 by newly established U.S.-based managers that are clients of the firm.
The Study analyzes key fund terms and trends, including investment strategies, fee structures, liquidity provisions, fund structures, and the use of founder and seed capital. It does not cover managed accounts, funds-of-one, or side letters, which generally involve customized terms. Key findings from this year’s Study include:
Key Findings:
- 81% of funds pursued equity or equity-related strategies, up from 77% in 2024, continuing the trend toward equity-focused launches among emerging managers. Standard class management fees averaged 1.69% for equity strategies (up from 1.38% in 2024) and 1.88% for non-equity strategies (up from 1.75% in 2024).
- Incentive allocation rates in standard classes averaged 18.93% of annual net profits, up from 17.11% in 2024. Approximately 44% of funds included a hurdle rate, consistent with recent years, and notably, 86% of those hurdles were structured as hard hurdles, reflecting evolving investor expectations.
- Founders classes remained a significant fundraising tool, with approximately 69% of equity funds and 33% of non-equity funds offering reduced management fees and/or incentive allocation rates to early investors through founders-class structures.
- 82% of equity funds and 100% of non-equity funds offered quarterly (or less frequent) liquidity, with the remaining equity funds permitting monthly withdrawals, underscoring managers’ continued ability to secure longer-term capital commitments.
- Lock-ups or investor-level gates were utilized by 92% of equity funds and 67% of non-equity funds, with approximately 38% of funds incorporating both features. Investor-level gates remained common across strategies, while the use of lock-ups continued to vary by fund type.
- Managers launching both U.S. and offshore funds continued to overwhelmingly favor master-feeder structures, with more than 80% relying on the Section 3(c)(7) exemption. Approximately one-third of managers launched solely a U.S. standalone fund, often as a means of establishing a track record before expanding to offshore or tax-exempt investor channels.
- Seed investment activity in 2025 remained broadly consistent with prior years, with institutional investors continuing to account for the majority of transactions. Investment sizes frequently exceeded $100 million, and deal structures increasingly incorporated mechanisms designed to support manager working capital while maintaining alignment between seed investors, managers, and third-party investors.