The hedge fund sends to its lowest level since 2008

A risk-on sentiment across global financial markets amid continued economic turmoil deterred would-be hedge funders from setting up new businesses in the second quarter.

The estimated number of new hedge fund launches slipped to 80 in Q2, down sharply from 185 in the first quarter of the year, according to fresh data from indexing and analysis firm Hedge Fund Research. The latest figure also shows the fewest new funds launched since the fourth quarter of 2008, during the Global Financial Crisis.

Financiers reduced the opening of new hedge funds even as overall performance picked up during the period relative to the broader markets.

From the beginning of this year to the end of August, the HFRI Fund Weighted Composite Index – a global index of the world’s largest hedge funds – fell just 4%, while the benchmark S&P 500 fell 17% over the same period.

Global macro hedge funds, which benefit from uncertainty due to political or economic events, were particularly successful, making the most of their long positions in commodities and the US dollar as all asset classes benefited from increased volatility with increases in interest rates by the Federal Reserve.

HFRI Macro 500 Index – The HFRI 500 Macro Index – which tracks macro-oriented strategies across the broader global hedge fund index, jumped 14.3% year to date through August, according to Hedge Fund Research data.

Still, new launches fell sharply in the second quarter despite that strong performance, HFR President Kenneth J. Heinz said in a statement.

“Investor’s risk aversion led to a one-time risk sentiment, and investors maintained exposures to established funds through the current volatile market paradigm of unprecedented geopolitical and macroeconomic uncertainty,” Heinz said.

In addition to a slowdown in new fund priorities, hedge fund liquidations increased from the previous quarter, and approximately 156 funds closed their operations in Q2, up from 126 in the first quarter.

Gabriel Plotkin, CEO of Melvin Capital Management, is seen in a video frame as he testifies in a virtual hearing at a congressional hearing on February 18, 2021. (House Committee on Financial Services/Handout via Reuters)

Among the prominent hedge funds that closed during the quarter was Melvin Capital – the firm involved in shorting GameStop 2021 – previously known as one of the most successful hedge funds on Wall Street.

Tiger Global Management, one of the world’s largest hedge funds, lost a whopping 63.3% in the second quarter after fees were hit by a slide in technology stocks amid rising interest rates.

Meanwhile, in a recent letter to investors, Anne Farlow, chairman of the board of Bill Ackman’s Pershing Square Holdings (PSH) – which was down 15.2% year to date through August 31 – admitted, “The first half of 2022 is a challenging period for PSH, companies and the financial markets in general, driven largely by rising inflation, monetary policy uncertainty, and geopolitical events.”

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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