The Formation Record

Hedge funds didn't shrink. Everything else grew.

What 290,732 Form D filings say about who is raising private funds, 2016–2025.

Ask anyone in the industry what happened to hedge funds over the last decade and you will hear some version of the same story: the money went to venture, then venture blew up, then everyone went back to credit. It is a good story. The filing record tells a more precise one, and the precise version is more useful if you are the person about to raise a fund.

Every private fund that sells securities under Regulation D files a Form D with the SEC. It is a short form, it is public within days, and almost nobody reads it in bulk. We read all of it — every Form D filed since 2016, 506,218 filings, of which 290,732 are pooled investment funds. What follows is what the form says, not what the market says about itself.

The headline number, and why it misleads

In 2016, 51% of all new pooled-fund filings identified as hedge funds. By 2025 that was 27%.

Halved. It is a genuinely striking number and it is the one that would have been the headline. It is also, on its own, wrong — or at least, wrong in the way it will be read.

Now the count rather than the share:

Hedge fund formation in 2025 is within 2% of where it was in 2016. Ten thousand a year, then and now. It never fell in any meaningful sense. What collapsed was its share, because the denominator grew by 82% — from 20,032 new funds a year to 36,426.

The story is not decline. It is crowding. Roughly the same number of hedge funds are being launched into a market with sixteen thousand more new funds a year competing for the same allocators’ attention.

If you are raising a hedge fund in 2026, that reframing matters. You are not entering a shrinking category. You are entering a category that stopped growing while everything around it did — which is a harder problem than decline, because decline at least thins the field.

What actually grew

Venture is the obvious answer and it is the wrong one to stop at. Venture-fund formation went from 1,130 a year to a 2022 peak of 10,479 — a ninefold rise in six years — and has since settled around 8,000. That is not a collapse either; it is a fall of about 20% from a peak that was itself an anomaly. Venture in 2025 forms seven times as many new funds as it did in 2016.

But look at private equity, which nobody describes as the story of the decade: 15% of formation in 2016, 22% in 2025, and in counts 3,101 → 8,081 — a 161% increase. PE rose almost every single year and never gave any of it back. Private equity is the quiet winner and it does not appear in anyone’s narrative.

The structural signal underneath

Two exemptions dominate private fund formation. A fund relying on section 3(c)(1) accepts no more than 100 beneficial owners. A fund relying on 3(c)(7) can take an unlimited number, but every investor must be a qualified purchaser — broadly, $5 million in investments rather than the $1 million net worth an accredited investor needs. 3(c)(7) is the big-fund exemption. 3(c)(1) is the small-fund one.

In 2016, sixty percent of new funds were built for qualified purchasers. By 2021 the small-fund exemption had overtaken it — the first time in the series — and although it has since drifted back, 3(c)(1) remains eleven points above where it started. More new funds are being built to hold a hundred investors than were a decade ago. That is the most concrete evidence in the record that the median new fund is a smaller enterprise than it used to be.

Where it is happening

New York is still where funds are formed: 19.3% of all 2025 pooled-fund filings. California is 11.4%, Washington 8.3%, Delaware 7.1%, Texas 6.5%. Florida is the movement:

Florida has doubled its share in a decade, and unlike most such claims this one is not an artifact of a small base — 1,824 new funds in 2025 against 497 in 2016. The state now forms more new private funds annually than it did in the entire 2016–2017 period combined.

What we would tell someone raising a first fund

The category is not the problem; the queue is. Hedge fund formation is flat, not falling. If raising is harder than it was, the reason is in the denominator.

Small is now normal. The rise of 3(c)(1) means a hundred-investor fund is not a compromise version of a real fund; by 2021 it was the more common filing.

Geography moved and is still moving. Washington forms more new funds than Texas. Florida forms more than Illinois and Massachusetts.

Method

Every figure is computed from Form D filings retrieved from the SEC’s EDGAR system, covering 2016-01-01 through 2025-12-31 — 506,218 filings, of which 290,732 are pooled investment funds, as retrieved on 2026-08-31. That date matters: the SEC throttles bulk retrieval, we refill the throttled days over subsequent nights, and a closed year therefore keeps gaining filings for some weeks after it closes. These counts describe the record as we held it on that date. Percentages are shares of new pooled-fund filings in the stated year. Only complete calendar years are shown; 2026 is excluded because it is partial, and a partly-observed year is not a small sample of that year but a biased one.

“Hedge fund”, “private equity fund” and “venture capital fund” are the issuer’s own selections on the form, not our classification. Where a filer left the field blank the filing is counted in the denominator but in no strategy, which is why the rows do not sum to 100%. Counts are of filings, not of dollars or of distinct managers: a sponsor that launches four vehicles appears four times, which is the correct way to measure formation activity and the wrong way to count firms.

This is analysis of a public filing record. It is not legal advice, and it is not a recommendation about any fund, manager or strategy.