Big drop in money flowing into new hedge funds

The hedge fund industry may be roundly celebrating 2009 as a comeback—19% returns are always exciting—but it was still a tough year to get into the business, according to a survey just released by Absolute Return + Alpha magazine.

About 750 new hedge funds launched last year, roughly equivalent to the number launched in 2008, yet last year’s crop had a harder time raising money. The 2009 class of hedge funds raised just under $15 billion, a 36% drop from the $23 billion raised in aggregate by newbies for 2008 and less than half the amount raised in 2007, when investors poured a whopping $31.5 billion into new hedge funds.

There are also fewer big fish in the sea: Just two of the top 10 funds launched last year had more than $1 billion in assets, compared with five new funds that landed more than $1 billion in 2008.

The billion-dollar babies for 2009 were Woodbine Capital Advisors, run by Soros Fund Management alums Joshua Berkowitz and Marcel Kasumovich, which ended the year with $2.5 billion in assets, and Roc Capital Management, started by former Deutsche Bank trader Arvind Raghunathan, which closed out the year with $1 billion in assets.

The rest ranged in size from $950 million to $400 million.

New York is still the center of the hedge universe, with six of the largest new funds headquartered in Manhattan, three in Connecticut, and one in London.

There are also some familiar faces in this crew. Westport, Conn.-based Manatuck Hill Partners, which “launched” with $400 million, is actually a born-again version of the Pequot Scout Fund, which spun out of the embattled Pequot family of funds in July, and is still run by Scout Fund manager Mark Broach.

Manhattan-based Saba Capital Management, which entered the world with $560 million in assets, is being run by Boaz Weinstein, the former Deutsche Bank bond trader who notoriously lost about $1 billion betting on Ford Motor Co. debt and investing heavily in credit-default swaps.

Ms. Potkewitz is a reporter at Crain’s New York Business, a sister publication to InvestmentNews.