New wave of hedge fund start-ups find life is tough

(Reuters): The hedge fund industry’s proverbial ‘two traders and a terminal in Mayfair’ are back. But starting your own hedge fund is likely to prove a much less lucrative venture for the foreseeable future, thanks to hard bargaining by investors. Investor confidence is returning after the credit crisis in which clients deserted small firms. Some $42 billion of net inflows into the industry this year have encouraged managers to take the risk and start boutiques, just as in the pre-crisis boom years. But the rewards look set to be less lucrative, as still-nervy clients invest smaller sums than before the credit crisis. They often invest in return for a discount on charges, giving managers a lower asset base on which to earn fees.

"There is renewed confidence. The marketplace for start-ups seems to be fairly robust," said Andrew Rubio, chief executive of Throgmorton, which provides back-office services for hedge funds including Brevan Howard, one of Europe’s biggest hedge fund firms.

Go to article