Former managers at Millennium Management LLC, Ziff Brothers Investments LLC, Carlyle Group LP and TPG-Axon Capital Management LP are starting hedge funds, leading a recovery in capital raising in London.

Several funds each already have more than $100 million in assets lined up, five people with knowledge of the matter said. While fundraising still trails the pre-crisis boom, the pickup shows growing confidence in Europe, where firms were losing top traders to U.S. funds as recently as last year.

“It’s the quality of the startup launches which has really stood out this year,” said Gideon Margo, who assists hedge funds as a director in capital services at Credit Suisse Group AG in London. “In 2013, most of the key launches in Europe were from well-known existing hedge fund managers, but this year we have seen new managers with real pedigree raise a healthy level of assets.”

Fredrik Juntti, previously at TPG-Axon and Citadel LLC, is forming Abberton Capital, while Christopher Dale, formerly of Millennium, is starting Kintbury Capital LLP, filings with the U.K.’s Companies House show. Both firms intend to get underway in the fourth quarter, said people familiar with their plans who requested anonymity because they’re not authorized to speak publicly. David Fear and Michael Sidhom, former Ziff Brothers fund managers, are each working on separate startups, people with knowledge of their plans said.

Leading Performers

Investors added about $30.5 billion to hedge funds globally in the three months through June, the largest quarterly total in more than three years, according to data from Hedge Fund Research Inc. While more than half went to funds that manage in excess of $5 billion, about $750 million was allocated to those with less than $1 billion, HFR said.

As a group, hedge-fund managers with a track record of less than two years led industry performance in the year that ended June 30, with an average gain of 11.3 percent, according to Chicago-based HFR. That compares with 9.1 percent for the industry overall.

“Emerging funds tend to outperform,” said Lisa Fridman, head of research at Pacific Alternative Asset Management Co., a fund of hedge funds. “That’s the potential draw.”

The cash influx is spurring traders to start funds even though European regulations, such as the Alternative Investment Fund Managers Directive, have made it more expensive by increasing compliance costs. Funds generally need at least $100 million in assets to start, said Fridman.

‘Significant Backing’

“Managers who consider opening a firm try to ensure that they have significant backing from the early-stage investors before taking a leap,” Fridman said.

Hedge funds can struggle in their first three years as they try to demonstrate superior returns and attract capital. Even as new funds are getting going, others are shutting down. Closures in the year through July totaled 979, the highest since 2009, according to HFR.

Investors are also questioning whether hedge funds’ performance justifies the fees, which typically amount to 2 percent of assets and 20 percent of investment gains.

The California Public Employees’ Retirement System, the biggest U.S. pension, said on Sept. 15 that it would eliminate its $4 billion allocation to hedge funds. Three days later, the $126 billion Teacher Retirement System of Texas, the sixth- largest U.S. public pension, cut its hedge fund allocation to 8 percent from 9 percent of its assets.

Startup Plans

Juntti, 43, lined up as much as $250 million for London- based Abberton, an event-driven, equity long-short fund, two people with knowledge of the matter said. Juntti hired a chief operating officer, Craig Simkin, from Meditor Capital Management, along with Quentin Dumortier, who formerly worked for Horizon Asset Ltd. and Edoma Partners LLP.

Dale, 44, who left Millennium this year, registered the name Kintbury Capital with Companies House in August. He plans to start a European equity long-short fund, according to the people familiar with the matter.

Fear, who registered the name Thunderbird Partners, is speaking to firms that provide services to hedge funds and will probably start a fund next year, two people said. Sidhom, 35, registered the name Immersion Capital LLP. Both funds, which will have an equity long-short strategy, are starting with investments from New York-based Ziff Brothers, according to one of the people.

An attempt to reach Fear and Sidhom through Ziff Brothers was unsuccessful.

‘Spinning Out’

“A lot of the managers are spinning out of big reputable funds and are being seeded by the hedge fund they have previously worked at,” said Alina Kanygina, the head of European business development at Sumitomo Mitsui Trust (UK) Ltd. “Some hedge funds struggle to retain their high-performing managers, but still like to profit from their performance when they spin out.”

Firms that offer seed money provide a pool of capital to help the manager begin trading. In return, the seeding fund gets 15 percent to 25 percent of the hedge fund’s fees.

Former Carlyle buyout directors Franck Falezan, Benoit Colas and Jean-Pierre Millet started an activist investing fund earlier this year, along with Martin Donnelly, Adam Lister, Benjamin Devaux and Nikolaus von Abercron, according to the firm’s website.

Silver Ridge

Anil Prasad, a former head of currencies and local markets at Citigroup Inc., and Farhang Mehregani, previously the chief investment officer of Sciens Capital Management LLC, are also setting up a London-based macro hedge fund, according to a person with knowledge of the matter. The fund, to be called Silver Ridge Asset Management UK LLP, may open in the first quarter of 2015, the person said.

An even bigger startup could be on the horizon if Chris Rokos, one of the founders of Brevan Howard Asset Management LLP, wins a lawsuit against the firm over whether he can start his own hedge fund. Rokos, who made $900 million while at Brevan, according to court documents in the case, left the firm in 2012 and started a family office in London.