Hedge Fund Launches Highest in Four Years: HFR

The volatile environment has seen an acceleration of new hedge fund launches in 2025, with the number of launches at a four-year high. At the same time, fund liquidations are at their lowest level since 2004, according to indexation and analysis firm HFR.

HFR estimates that new fund launches rose to 562, the highest annual total since 2021, with closures estimated at 287, below the 406 funds that closed in 2024, which was itself the lowest level since 2004. As previously reported by HFR, total hedge fund industry capital reached another record level to begin 2026, surging to an estimated $5.16 trillion.

In Q4 2025, an estimated 135 new funds were launched, led by Equity Hedge (65) and Macro (35) funds, which represents a trend shift from prior quarter when Relative Value Arbitrage led new launches by strategy. On the liquidations side, an estimated 72 funds closed their doors in Q4, led by Equity Hedge (35) and Relative Value (17) funds.

The average industry-wide management fee declined 1bp in Q4 from the prior quarter, settling at an estimated 1.33%, while the average industry-wide incentive fee increased to an estimated 15.83%, up 3 bps. For funds launched in 2025, the average management fee was an estimated 1.25%, while the average incentive fee was 17.92%, HFR says.

“Hedge fund launches reflect strong demand from institutional and retail investors in response to strong industry-wide performance, defensive and opportunistic positioning relating to geopolitical risk and a liquid, low-correlated performance profile relative to alternatives in private equity and private credit,” observes Kenneth Heinz, president of HFR. “Volatility across all assets has increased significantly into late Q1 2026, likely garnering interest in specialised, low-correlated and liquid strategies which diversify across geopolitical, private credit, energy and macroeconomic risks.

“As industry growth continues to accelerate to record levels, managers and investors are expanding the scope of their relationships with co-investment opportunities, and HFR is pleased to have recently launched the only co-investment index, highlighting strong performance of these opportunities,” he continues. “Volatility and uncertainty have surged to record levels as a result of the Iran military conflict and though the drivers of volatility may evolve throughout the year, volatility is likely to continue and evolve in coming months, propelling industry capital to new milestones while investors strategically position for both opportunities and risks.”