Stock

Hedge fund success formed by begin dimension, sturdy returns within the first yr: knowledge

© Reuters.

By Svea Herbst-Bayliss

BOSTON (Reuters) – Establishing a hedge fund with more capital and generating the highest returns in the first year indicate higher chances of survival in the often risky business. Goldman Sachs Group Inc (N 🙂 said in the research released on Friday.

Goldman, who has launched and funded thousands of hedge funds, said that almost all newcomers survive their first year, but that after five years, only 62% of all funds are in business.

The "break-even point after which less than half of managers … keep running seems to be between 6 and 7 years," said Goldman's Hedge Fund Survivorship 2020 report, which was released to clients.

2020 was a particularly difficult year for hedge funds that fought against the spinning markets during the corona virus outbreak. The liquidations reached their highest quarterly level since 2015, as the data show.

American-based managers tend to launch funds with slightly more money, on average $ 230 million than in Europe with $ 200 million and in Asia with $ 98 million. In America the survival rate is 53% lower than in Europe with 64% and in Asia with 62%.

Almost three quarters of the funds launched with assets of $ 1 billion or more are still in business. The data shows that the fortune averages $ 2.9 billion. Among the smallest funds that start at less than $ 25 million, only 40% are in business, Goldman said, putting their average term at 36 months.

Strong returns in the early years often lead to a solid foundation for the company, according to the report, with the industry's largest managers averaging 18% in the first year. Smaller funds returned 9% to 11%.

Disclaimer: Fusion Media would like to remind you that the data contained on this website is not necessarily real-time or correct. All CFDs (stocks, indices, futures) and forex prices are not provided by exchanges, but by market makers. Therefore, prices may not be accurate and may differ from the actual market price. This means that the prices are indicative and not suitable for trading purposes. Therefore, Fusion Media assumes no responsibility for any trade losses that you may incur from using this data.

Fusion Media or persons dealing with Fusion Media are not liable for any loss or damage caused by reliance on the information contained on this website such as data, offers, diagrams and buy / sell signals. Please be fully informed about the risks and costs associated with trading on the financial markets. This is one of the most risky forms of investment that is possible.

Related Articles