A recent Seward & Kissel study reveals a divergence in fee structures and investor terms for new hedge fund launches in 2024. While the majority of new funds (77%) focused on equity strategies, these managers are increasingly cutting fees, with average management fees falling to 1.38%. They are also reducing investor restrictions to attract capital in a challenging fundraising environment.

Conversely, new non-equity funds, such as credit and macro strategies, are bucking this trend, raising average management fees to 1.75%. These funds also more frequently impose lock-ups and investor-level gates. This suggests that non-equity strategies are experiencing greater pricing power, likely due to investor demand for diversification and downside protection.

Despite these differences, both equity and non-equity funds are trending towards more stable capital, with 95% offering quarterly or less frequent liquidity. Equity funds are also increasingly utilizing founders classes, and there is a notable rise in incentive allocation hurdles within equity strategies, alongside a growing interest in offshore fund structures to access global investors.

End Notes

Source: https://www.hedgeweek.com/new-hedge-fund-managers-pivot-to-non-equity-strategies-amid-fee-pressures/