Hedge Fund Launches, Liquidations Rise To Highest In Two Years In 1Q
Posted by Eva Szalay. Last updated: July 16, 2026
A volatile start to the year meant that both new launches and liquidations jumped sharply as hedge funds navigate the changing landscape, according to the latest HFR Market Microstructure Report.
Liquidations bounced off historic lows to the highest quarterly total of 129 in two years as investors positioned for the defining performance drivers of recent quarters. These were continued geopolitical risk, AI and cryptocurrency volatility, underpinned by an uncertain economic growth and inflation backdrop in 2026. For the FY 2025, fund closures totaled an estimated 287 liquidations, far below the 406 in the previous year.
At the same time, the estimated number of new funds launched in the first three months of the year rose to 166, an increase of 30 over the prior quarter and 45 YoY. Last year saw a record number of launches with 561 funds popping up since the start of HFR data in 2021.
Launches were concentrated in the AI and technology sectors, indicating both risks and opportunities for the industry for the second half of the year, Kenneth J Heinz, President of HFR said.
Total hedge fund industry capital hit another record level through 1Q 2026, surging to an estimated $5.22 trillion.
“Increasing hedge fund launches through early 2026 clearly indicated strong institutional and retail demand in the fact of accelerating geopolitical risk as well as increased opportunities associated with AI, Technology and participation in the ongoing record IPO cycle,” Heinz said.
Macro strategies launched 52 new funds in 1Q, compared with 80 equity-focused ones, making macro the second highest area of interest. On the liquidations side, 64 equity funds shuttered their doors and 25 macro funds closed down.
Management fees continued to decline industry wide, with the average slipping 1 basis point in 1Q26 from the prior quarter, settling at an estimated 1.32%, while the average industry-wide incentive fee also ticked down slightly to an estimated 15.78%. For funds launched in 1Q26, the average management fee was an estimated 1.22%, while the average incentive fee was 17.4%.
HFR estimates that Goldman Sachs, UBS, JP Morgan, and Morgan Stanley remained the top prime brokers for hedge funds to begin 2026, while SS&C GlobeOp, Citco Fund Services, and IFS State Street remained the top hedge fund administrators.
