Hedge fund start-ups face tougher fundraising as industry giants dominate

Launching a hedge fund has become increasingly difficult as investors direct more capital toward established multi-strategy firms, according to a Bloomberg report. Sachin Gupta, 37, launched Covara Capital last year after the closure of the fund where he had worked. Backed by $250m in seed capital from Blackstone, Covara manages approximately $265m after one year of operations, a figure that sits only marginally above its initial backing and falls well short of the billions of dollars such a launch might have been expected to attract from institutional investors.

Gupta's experience reflects a broader shift in which the growing scale of leading managers makes it harder for new firms to win institutional allocations. Adam Blitz, a veteran hedge fund investor whose Evanston Capital Management has allocated around $4bn to emerging managers, estimates that the number of new launches has fallen by roughly half over the past five years. The largest firms continue to draw substantial inflows, with the top 10 hedge fund managers each overseeing at least $75bn. Millennium Management, led by Izzy Englander, recently raised $22bn, bringing it closer to $100bn.

Historical comparisons underline the gap. Bloomberg calculations show 12 hedge funds launched with more than $1bn in 2005, whereas only one firm had achieved a comparable launch by the end of September this year. Goldman Sachs research indicates hedge funds starting with at least $1bn have an 84% probability of surviving five years, versus a survival rate below 50% for those beginning with $25m, and smaller firms are more likely to close within roughly three years. Commentators also cite concern that concentration among a handful of large managers, many pursuing similar strategies, could heighten the risk of correlated selling during market stress.

The environment is also shaping career decisions. Kelly Granat, a two-decade Lone Pine Capital veteran who became co-chief investment officer before founder Stephen Mandel stepped back, joined Boston-based Atreides Management rather than launching independently, despite being regarded as a potential candidate to raise substantial capital. Geoffrey Lauprete, formerly CIO at WorldQuant, left in 2024 to establish Libero Capital with discussed backing from Blackstone and Paloma Partners, but dropped the project late last year and joined Point72 Asset Management to lead its quantitative business. Connie Lee, who left Tiger Global Management in 2023, launched Felis Advantage in March after roughly three years, raising $150m supported by a large endowment, according to a regulatory filing and a person familiar with the business.

One alternative to independent fundraising is operating within a larger platform. Millennium has increasingly provided capital to emerging and established managers, in some cases committing billions of dollars to external funds, some of which manage capital exclusively for Millennium while others can raise from additional investors. Bobby Jain's Jain Global illustrates the model: after leaving Millennium in 2023 and building a roughly $5bn business across seven investment divisions, Jain returned capital to all external clients earlier this year and shifted to managing money exclusively for Millennium.