Hedge Fund Launches Accelerate in Q2
Posted by Colin Lambert. Last updated: October 17, 2025
New hedge fund launches accelerated into the second half of 2025 while historical low liquidations fell further, according to the latest HFR Market Microstructure Report, released by HFR.
The estimated number of new funds launched in Q2 rose to 141, bringing the first half 2025 total to 262, on pace to top the estimated 479 launches in 2024, which was the highest annual total since 2021, HFR says. At the same time only an estimated 65 funds closed, bringing the first half total to 138, and pacing the year to fall below the estimated 406 liquidations in 2024, which was the lowest level since 2004.
Total hedge fund industry capital reached another record level to begin the second half of the year, surging to an estimated $4.74 trillion. While, by strategy, Equity Hedge (EH) led new launches in Q2, with an estimated 60 new funds opening their doors, the strategy also had the largest number of liquidations at an estimated 25 funds. Macro launches followed closely, and saw an estimated 54 new funds launched in the second quarter.
The performance dispersion of the HFRI Fund Weighted Composite Index (FWC) expanded in Q2, as the top decile of index constituents returned an average of +21.2%, while the bottom decile declined by an average of -9.8%. This top/bottom dispersion of 31.0% is up 25.8% in the first quarter. For the trailing 12 months ending Q2 2025, the top decile of FWC constituents returned an average of +34.5%, while the bottom decile declined by an average of -17.6%, representing a top/bottom decile dispersion of 52.1%.
The average industry-wide management fee remained unchanged from the prior quarter at an estimated 1.34%, which is down only one basis point year-on-year. The average incentive fee ended Q2 at an estimated 15.79%, also a decline of one basis point from the prior quarter, though this represents a year-on-year decline of 18 bps from Q2 2024. For funds launched in 2Q25, the average management fee was an estimated 1.26%, while the average incentive fee was 17.73%, HFR says.
Goldman Sachs, UBS, JP Morgan, and Morgan Stanley remained the top prime brokers for hedge funds into the second half, while SS&C GlobeOp, Citco Fund Services, and IFS State Street remained the top hedge fund administrators.
“Hedge fund industry strength accelerated into H2 2025 with record assets under management expected to surge further in coming quarters, combining the highest first half of new launches in three years with the lowest estimated number of liquidations in 20 years, as investors navigated unprecedented AI investment, historic M&A, lower interest rates, falling geopolitical risk, and continued tariff uncertainty,” says Kenneth Heinz, president of HFR. “Institutions continue to increase allocations to both existing funds as well as newly launched funds, with the goals of opportunistically navigating these historic market cycles and managing unprecedented opportunities alongside evolving policy uncertainty and risk.
“It is likely that these powerful trends accelerate asset growth and performance through year end, driving industry capital to new milestones while investors strategically position for both opportunities and risks,” he concludes.
