Seward & Kissel’s 2022 New Manager Hedge Fund Study (formerly known as The New Hedge Fund Study) identifies key findings and trends among newly-formed hedge funds sponsored by U.S.-based managers entering the market. The 2022 Study analyzes relevant data points among Seward & Kissel clients meeting these criteria. As we have recently been recognized as the “Best Law Firm” by the Hedgeweek US Awards 2022 and as a top law firm with respect to market share of hedge funds by assets under management according to the Preqin Service Providers Report 2022, 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
Key Findings:
- Approximately 76% of the funds had equity or equity-related strategies, slightly up from 70% in 2021.
- With respect to management fees charged in the standard (i.e., non-founders) classes, the average rate was 1.42% for equity strategies (down from 1.52% in 2021) and 1.67% for non-equity strategies (approximately the same as in 2021).
- Incentive allocation rates in standard classes across all strategies averaged 18.75% of annual net profits (similar to 2021). In addition, approximately 15% of all funds had an incentive allocation hurdle (slightly down from 21% in 2021).
- Approximately 59% of the equity funds (approximately the same as in 2021) and 53% of the non-equity funds (about the same as in 2021) offered lower management fee and/or incentive allocation rates through their founders classes.
- 88% of the equity funds (up from 82% in 2021) and 93% of the non-equity funds (up from 90% in 2021) offered quarterly (or less frequent) withdrawals, with the balance permitting monthly withdrawals.
- Lock-ups or investor level gates were found in 69% of the equity funds and 67% of the non-equity funds, with 42% of all funds including both (up significantly from 21% in 2021). Of particular interest, there was a significant increase in the usage of investor level gates in the standard classes of equity funds, with an increase from 18% in 2021 to 60% in the current Study.
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