Fewer U.S. hedge fund starts so far this year

BOSTON (Reuters) - Roughly three dozen U.S. hedge funds have opened for business so far this year, 50 percent less than the same period last year, according to data released on Tuesday that underscored how tough it is to launch one of these portfolios now.

But the data also shows investors, like pension funds, endowments and wealthy individuals, are still flocking to these loosely regulated funds in search of better returns as the credit crisis and slower economic growth dents performance.

According to numbers compiled by trade magazine Absolute Return, the 35 new funds began trading with a total of $19.5 billion (9.9 billion pounds) in the first six months of 2008. That compares with 72 funds launched with $14 billion in the first half of 2007.

Industry experts estimate that roughly 10,000 funds manage about $2 trillion for investors.

Hedge funds suffered their worst ever returns at the start of 2008, as the credit crisis plus softer economic growth took its toll on hundreds of managers.

Tougher market conditions have made it increasingly difficult to launch new hedge funds as investors have become more demanding, sometimes requiring a longer track record as well as strong infrastructure, investors and lawyers said.

During the first half, David Stemerman, a former portfolio manager at hedge fund Lone Pine Capital, launched Conatus Capital Management with $2.3 billion, while Anand Parekh, who once worked at hedge fund Citadel Investment Group, started his Alyeska Fund at Highliner Investment Group with $1.5 billion. Both funds are specializing in stocks.

Lone Pine Capital launched a new emerging markets fund called Lone Dragon Pine with $1.84 billion while Goldman Sachs (GS.N) pulled in $7 billion for its GS Investment Partners fund.