Key Takeaways
- • Seward & Kissel's 2024 New Manager Hedge Fund Study, released May 12, 2025, finds new hedge funds lowered management fees for equity strategies while non-equity launches raised them, reflecting a bifurcated fundraising market.
- • Standard management fees for new equity funds fell from 1.48% in 2023 to 1.38% in 2024, while non-equity funds rose from 1.40% to 1.75%.
- • Lock-up or investor-level gate prevalence rose sharply for non-equity funds, from 71% in 2023 to 90% in 2024, while falling for equity funds from 78% to 72%.
- • Equity funds offering founders classes jumped from 49% to 70%, and incentive allocation hurdles in equity funds nearly tripled from 15% in 2022 to 44% in 2024.
- • Equity-related strategies made up 77% of new funds in 2024, up from 74% in 2023, and standalone U.S. funds fell to 55% from 68%.
Summary
According to the 2024 edition of The Seward & Kissel New Manager Hedge Fund Study, published by Seward & Kissel LLP, new hedge funds largely responded to a challenging fundraising environment by lowering management fees, but the response diverged sharply between equity and non-equity strategies. Equity-related strategies accounted for 77% of new funds in 2024, up slightly from 74% in 2023, and these funds charged an average standard management fee of 1.38%, down from 1.48% the prior year. Non-equity strategies, which made up 23% of new launches, displayed greater pricing power, with average standard fees rising from 1.40% in 2023 to 1.75% in 2024.
The study also identified a divergence in liquidity and lock-up terms. The share of equity funds imposing lock-ups or investor-level gates fell from 78% in 2023 to 72% in 2024, while the share of non-equity funds with such restrictions rose from 71% to 90%. Both categories showed a strong preference for infrequent liquidity, with 95% of funds in each limiting withdrawals to quarterly or less frequent intervals. For non-equity funds this was in line with 2023, while the figure represented an increase from 74% of new equity funds in 2023.
Other findings show a sizeable increase in equity funds offering founders classes, from 49% in 2023 to 70% in 2024, while non-equity funds rose modestly from 47% to 50%. Incentive allocation hurdles in equity funds nearly tripled over two years, from 15% in 2022 to 44% in 2024, as managers sought better alignment with investors in bull market conditions. Standalone U.S. funds declined to 55% of launches from 68% in 2023.
Nick Miller, partner at Seward & Kissel Investment Management Group and lead author of the study, said that new equity managers were "leaving no stone unturned, employing fee cuts and founders classes, and launching more offshore funds" in tough fundraising conditions. Miller said the high share of funds offering quarterly or less frequent liquidity suggests managers are attracting "sticky capital" willing to ride out recent periods of high volatility. He also linked the rise in founders classes partly to demand for upfront commitments to cover operational costs, which he said puts pressure on managers to maintain fee levels.
The study also identified a divergence in liquidity and lock-up terms. The share of equity funds imposing lock-ups or investor-level gates fell from 78% in 2023 to 72% in 2024, while the share of non-equity funds with such restrictions rose from 71% to 90%. Both categories showed a strong preference for infrequent liquidity, with 95% of funds in each limiting withdrawals to quarterly or less frequent intervals. For non-equity funds this was in line with 2023, while the figure represented an increase from 74% of new equity funds in 2023.
Other findings show a sizeable increase in equity funds offering founders classes, from 49% in 2023 to 70% in 2024, while non-equity funds rose modestly from 47% to 50%. Incentive allocation hurdles in equity funds nearly tripled over two years, from 15% in 2022 to 44% in 2024, as managers sought better alignment with investors in bull market conditions. Standalone U.S. funds declined to 55% of launches from 68% in 2023.
Nick Miller, partner at Seward & Kissel Investment Management Group and lead author of the study, said that new equity managers were "leaving no stone unturned, employing fee cuts and founders classes, and launching more offshore funds" in tough fundraising conditions. Miller said the high share of funds offering quarterly or less frequent liquidity suggests managers are attracting "sticky capital" willing to ride out recent periods of high volatility. He also linked the rise in founders classes partly to demand for upfront commitments to cover operational costs, which he said puts pressure on managers to maintain fee levels.
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