Fewer hedge funds opened in the third quarter of 2014 than in any other quarter in a year, according to industry research firm Hedge Fund Research.

In the three months to September, only 240 new funds were launched, the smallest number of start-ups since the third quarter of last year when 233 new funds opened for business, the research firm said in data released on Thursday. During the second quarter of this year, 285 new funds were launched.

Although a handful of blockbuster names have spun out from former employers, investors blamed the more sluggish pace of launches on difficulty in raising money. Investors said they were taking longer to review start-ups and write them a cheque.

Assets managed by the industry reached a record US$2.82 trillion at the end of the third quarter, Hedge Fund Research said.

Earlier this year, Herb Wagner launched Finepoint Capital after leaving Baupost, Anand Desai launched Darsana Capital after leaving Eton Park and former Ziff Brothers executive Ryan Pedlow launched Two Creeks Capital.

In the first nine months of this year, 814 new hedge funds were set up, roughly the same pace as last year.

The Hedge Fund Research data also shows it is tougher to stay in business now than it was a year ago. In the first nine months of this year, 661 funds closed, far more than the 608 funds that shut down during the same time a year ago.

The research firm said 200 hedge funds had shut down in the September quarter, taking the total number of closures to 957 over the past 12 months.

"With global industry capital at a record level, competitive market pressures continue to shape the evolving landscape of the hedge fund industry," said president Kenneth Heinz.

But there was some encouraging news for new funds in the survey, as Hedge Fund Research noted that young managers tended to outperform more seasoned firms.

Emerging managers gained 0.8 per cent during the third quarter while the HFRI Fund Weighted Composite Index dipped 0.3 per cent. For the first nine months, emerging managers increased 4.7 per cent, while the broader index shows a 2.85 per cent rise.

This article appeared in the South China Morning Post print edition as: New hedge fund launches drop as funding tightens

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