New hedge funds net most cash since 2004

Getty Images David Siegel, co-founder of Two Sigma.

Getty Images
David Siegel, co-founder of Two Sigma.

Hungry for returns, investors are giving more new hedge funds a test drive.

Funds based in the Americas that launched in 2014 pulled in $34.1 billion, the highest annual total since $39.5 billion was raised in 2004, according to new research from industry news and data provider Absolute Return. The money was spread out over 84 new funds running at least $50 million, the largest total since 86 of the same minimum size were formed in 2006.

The largest fresh fund offerings came from a mix of new and old firms. The largest was the Two Sigma Absolute Return Macro Master Fund from leading quantitative investor Two Sigma. The vehicle raised a whopping $3.3 billion as of Jan. 1.

The firm, co-founded in 2001 by D.E. Shaw veterans John Overdeck and David Siegel, was a top performer last year; its more than $5 billion Compass fund gained 25.6 percent net of fees in 2014, according to a person familiar with the situation. Two Sigma managed $24 billion overall as of Tuesday and recently won the Absolute Return award for firm of the year. A spokesman for Two Sigma declined to comment.

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The largest fund raised by a new firm was Finepoint Capital Partners I, which pulled in $2.4 billion, according to Absolute Return. The offering is from Boston-based Finepoint Capital, the hotly anticipated firm founded by Baupost Group veteran Herb Wagner. Baupost funds have been closed to new capital since 2008, making a similar strategy run by a former top deputy of founder Seth Klarman attractive.

A spokesman for Finepoint did not respond to a request for comment.

Top 10 new hedge funds of 2014 by assets

Fund Name
Assets ($M)
New firm?
Two Sigma Absolute Return Macro Master 3300 No
Finepoint Capital Partners I 2400 Yes
Lone Tamarack 2000 No
Soroban Opportunities 1800 No
Hitchwood Capital Master 1700 Yes
TBC Partners 1600 Yes
Two Creeks Capital Partners 1550 Yes
Marathon Europe Credit Opportunities II 1312 No
Aravt Global Partners 1200 Yes
Source: Absolute Return / HedgeFund Intelligence. Assets as of Jan. 1, 2015.

The amount raised by the new firms is impressive given that many managers start with less than $100 million in assets. Existing shops often have a better chance of raising money for new funds given existing return track records, pre-built infrastructure and larger sales forces.

Indeed, the top new firms were relatively known commodities.

“Pedigree was the name of the game in 2014,” said Absolute Returnresearch editor Amal Robleh. “If you had Baupost, Scout or Ziff Brothers on your resume you had a pretty good shot at raking in the cash.” (Hitchwood Capital was founded by Scout co-founder James Crichton and Two Creeks Capital Management comes from Ziff Brothers Investments veteran Ryan Pedlow).

Impressively, new firms raised the majority of all new fund capital in 2014, about 57 percent, according to AR. Overall, there were 12 launches managing $1 billion or more as of Jan. 1, representing 59 percent of all capital into new funds.

The most common strategy was stock-focused, with 24 new launches raising a collective $17.3 billion, according to AR.

New hedge funds with at least $50 million

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Number of funds
Assets raised ($B)
2004 81 39.5
2005 73 33.5
2006 86 30.6
2007 81 31.5
2008 55 23.2
2009 53 14.9
2010 59 17.4
2011 50 20
2012 71 24.9
2013 75 20.8
2014 84 34.1
Source: Absolute Return / HedgeFund Intelligence
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