The pace of new launches speeded up last year and liquidations fell, coming at what has been one of the best years in hedge funds in more than a decade. Hedge funds are part of the toolkit that private banks and wealth managers use to manage risk exposures and profit from market shifts.

Last year was the strongest for hedge fund returns in general since 2009 in the immediate shadow of the global financial crisis. And perhaps unsurprisingly, with 2025 being banner year for returns, new hedge fund launches accelerated towards the end of last year.

Figures from Hedge Fund Research, the Chicago-headquartered research firm, showed that the estimated number of new funds launched in the third quarter of 2025 rose to 165, bringing the year-to-date total to 427 through Q3, on track to be the highest annual total since 2021.

The number of hedge funds that were liquidated held at historically low levels, as only an estimated 77 funds closed in Q3, which means that 215 closed since January last year, – below the estimated 406 liquidations in 2024.

As previously reported by HFR, total hedge fund industry capital reached another record level to begin the fourth quarter of last year, reaching $4.98 trillion.

After what had been a generally difficult decade up to the pandemic, the rise in volatility amidst Russia’s invasion of Ukraine, shifts in foreign exchange rates, diverging macroeconomic policies, and other forces gave the hedge fund industry more opportunities to shine. A rise in corporate M&A activity in the US, and Hong Kong’s resurgent initial public offering market, have helped the hedge fund story. 

HFR said that when broken down by strategy, new launches were led by the Relative Value Arbitrage area, with an estimated 70 new funds in this year, followed by the equity hedge and macro areas, which saw an estimated 47 and 41 new launches, respectively, in Q3.

The largest category to see fund liquidations was equity hedge.

Fees
The data showed that the average industry-wide management fee remained unchanged from the prior quarter at an estimated 1.34 per cent; this has been below 1.4 per cent since Q3 2019. 

The average industry-wide incentive fee ended the quarter at 15.8 per cent, up 1 basis point from the second quarter of last year, but still down on a year ago by 11 basis points.

Goldman Sachs, UBS, JP Morgan, and Morgan Stanley remained the top prime brokers for hedge funds heading into the final three months of 2025; SS&C GlobeOp, Citco Fund Services, and IFS State Street remained the top hedge fund administrators.