New hedge fund launches accelerated into 2026 while liquidations remained near historic lows, as investors positioned for increasing geopolitical risk, AI and cryptocurrency volatility, and uncertain economic growth and inflation in 2026 according to HFR.
The estimated number of new funds launched in 2025 rose to 562, the highest annual total since 2021, according to the latest HFR Market Microstructure Report.
Hedge fund liquidations remained at historically low levels with closures totalling an estimated 287 liquidations, far below the 406 funds that shut down in 2024, and the lowest level since 2004. As previously reported by HFR, total hedge fund industry capital reached another record level to begin 2026, surging to an estimated USD5.16 trillion.
In 4Q 2025, an estimated 135 new funds were launched, led by Equity Hedge (65) and Macro (35) funds, which represents a trend shift from the previous quarter when Relative Value Arbitrage led new launches by strategy. On the liquidations side, an estimated 72 funds closed their doors in 4Q25, led by Equity Hedge (35) and Relative Value (17) funds.
HFR launches co-investment index
HFR launched the HFR Co-Investment Index (HFRCINV) in March 2026, described as a high-performing index that captures aggregate performance of curated fund managers offering Best Ideas and Co-Investment opportunities to investors.
The index is investable and boasts a five-year annualised return of 18.47 per cent and a five-year Sharpe ratio of 1.04 as of March 16, 2026.
The performance dispersion of the HFRI Fund Weighted Composite Index® (FWC) expanded in 2025, as the top decile of index constituents returned an average of +47.3 per cent, while the bottom decile declined by an average of -11.3 per cent, representing a top/bottom decile dispersion of 58.6 per cent, compared to the estimated top/bottom dispersion of 45.3 per cent in 2024.
The average industry-wide management fee declined 1 basis point in 4Q25 from the prior quarter, settling at an estimated 1.33 per cent, while the average industry-wide incentive fee increased to an estimated 15.83 per cent, up 3 basis points. For funds launched in 2025, the average management fee was an estimated 1.25 per cent, while the average incentive fee was 17.92 per cent.
HFR estimates that Goldman Sachs, UBS, JP Morgan, and Morgan Stanley remained the top prime brokers for hedge funds heading into 2026, while SS&C GlobeOp, Citco Fund Services, and IFS State Street remained the top hedge fund administrators.
“Hedge fund launches reflect strong demand from institutional and retail investors in response to industry-wide performance, defensive and opportunistic risk positioning and a liquid, low-correlated performance profile relative to alternatives in private equity and private credit,” says HFR President, Kenneth J Heinz.
“Volatility across all assets increased significantly in late 1Q26, driving interest in specialised, low-correlated and liquid strategies to diversify across geopolitical, energy and macroeconomic risks. As industry growth continues to accelerate to record levels, managers and investors are expanding the scope of their relationships with co-investment opportunities highlighting the strong performance of these opportunities. Volatility and uncertainty have surged to record levels as a result of the Iran military conflict and although the drivers of volatility may change throughout the year, volatility will continue to be a strong feature of the months ahead.”
