Seward & Kissel’s 2020 New Hedge Fund Study identifies key findings and trends among newly-formed hedge funds sponsored by U.S.-based managers entering the market. The 2020 Study analyzes relevant data points among Seward & Kissel clients meeting these criteria. As the top U.S. law firm servicing new hedge fund launches (source: Preqin), we believe that the number of funds within the Study is large enough to extract a representative sample of important data points that are relevant to the hedge fund industry.
- 66% of the funds had equity or equity-related strategies, slightly down from 70% in 2019
- With respect to management fees charged in the standard (i.e., non-founders) classes, the average rate was 1.51% for equity strategies (up from 1.43% in 2019) and 1.52% for non-equity strategies (down from 1.68% in 2019).
- Similar to 2019, lock-ups or investor level gates were used by 79% of the equity funds and 70% of the non-equity funds, with 5% of all funds including both. Fund level gates have continued to be disfavored by both new managers and investors.
- Sponsors of both U.S. and offshore funds continued to almost exclusively set up master-feeder structures (as opposed to side-by-side structures) and utilized the Section 3(c)(7) exemption 83% of the time.
- Looking back five years to 2015, there have been noticeable changes in both the fee and liquidity terms of newly-formed funds.
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