“Hedge fund launches declined in the third quarter, as both managers, investors and financial institutions awaited the finalization and regulatory approval of the Volcker Rule, which includes provisions restricting proprietary trading by financial institutions, as well as restricting ownership of hedge fund firms by financial institutions,” said Kenneth Heinz, president of HFR.

“While the increased uncertainty has likely adversely impacted hedge fund launches in the short-term, over the intermediate to long term, the adoption of the rule is likely to result in increased hedge fund launches, as experienced investment professionals set up new funds utilizing their trading acumen,” Heinz said.

Hedge funds are likely to expand in scope to assume an increasingly mainstream role in global capital markets, he added.  

The Volcker Rule, passed last week after a delay of three years, is named after former Federal Reserve chairman Paul Volcker and aims to limit excessive risk by preventing certain banking entities from betting on financial markets for their own account. As well as prohibiting banking entities from engaging in various short-term proprietary trades for their own gain, the final rules also impose limits on their investments in, and other relationships with, hedge funds or private equity funds. Some media reports have also noted that the Volcker guidelines may make it harder for some banks to provide certain private fund services to their high net worth clients.

According to the research firm, hedge fund launch trends have not - unlike what seems to be the case with the Volcker Rule - been significantly impacted by the recent relaxation of hedge fund marketing restrictions associated with the JOBS Act.