HedgeCo.Net — Launching a hedge fund has become harder as investors pour capital into established multi-strategy firms, leaving even well-backed new managers struggling to raise outside money, Bloomberg reported. The case cited most prominently is Covara Capital, launched last year by former portfolio manager Sachin Gupta with $250 million of seed capital from Blackstone. After a year in business, Covara manages about $265 million, only marginally above its starting commitment.
The numbers on launches are stark. Adam Blitz of Evanston Capital Management, which has allocated about $4 billion to emerging managers, estimates the number of new launches has fallen by roughly half over five years. Bloomberg calculated that 12 hedge funds launched with more than $1 billion in 2005, compared with just one by the end of September this year. Goldman Sachs research cited in the report found that funds starting with at least $1 billion have an 84% chance of surviving five years, versus under 50% for those starting with $25 million.
At the top of the industry, the opposite is happening. The 10 largest hedge fund managers each oversee at least $75 billion, and Millennium Management recently raised $22 billion, moving it closer to $100 billion. That pull is shaping careers: longtime Lone Pine Capital executive Kelly Granat joined Atreides Management rather than starting her own firm, and former WorldQuant chief investment officer Geoffrey Lauprete dropped plans for Libero Capital to join Point72, where he now leads its quantitative business.
Those who do launch are often doing so slowly and with modest capital. Connie Lee, who left Tiger Global in 2023, opened Felis Advantage in March after about three years of preparation, raising $150 million with support from a large endowment. Others are building inside larger platforms instead. Millennium has increasingly provided capital to outside managers, and Jain Global, the multi-strategy firm Bobby Jain founded after leaving Millennium, returned external capital earlier this year and now manages money only for Millennium.
For allocators, the concentration raises two issues. Emerging manager programs may find unusually favorable terms and capacity with talented teams that cannot raise from the big consultants, but survival risk is real at small scale. The report also notes the systemic concern that many of the largest funds run similar strategies, which could increase the risk of correlated selling in a stress event.