Investors' appetite for hedge-fund start-ups is slowly returning. But managers typically are raising relatively small amounts and some are granting concessions on key terms.

The pace of new fund launches has picked up after plunging dramatically in late 2008, underscoring a broader trend of money generally flowing back into the sector. In the third quarter, 173 new funds launched, compared with 119 in the previous quarter and just 42 in the last three months of 2008, according to Chicago data-tracker Hedge Fund Research Inc. Bankers who provide services to hedge funds say there are a number of new launches in the pipeline.