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The hedge fund sector in the U.S. continues to expand at a healthy clip, despite longstanding concerns about overcrowding, slipping returns and the threat of regulation.

First-half numbers compiled by Absolute Return magazine and reported by MarketWatch show 72 new funds started up in the U.S., up from 51 in the same period of 2006. The 2007 launches totaled $14 billion, or 20 percent above the 2006 first-half total of $11.7 billion.

Long/short U.S. equity is the most popular strategy among new launches this year, according to Financial News, which also cites the Absolute Return report. Such funds made up 40 percent of the crop, in terms of both number of launches (28 funds) and initial assets ($4.7 billion). In the first half of 2006, long/short U.S. equity funds accounted for 19 launches totaling $2.9 billion.

This year's three biggest new funds each launched with more than $1 billion. They are Carlyle Bluewave, with an estimated $2 billion; CVI Global Value, with $1.4 billion; and GMN Master Fund, with $1 billion.

While institutions and wealthy individuals continue to sponsor new hedge fund formation, the fund industry this year gained access to an entirely new source of capital: public shareholders. Och-Ziff Capital Management last week became the latest hedge fund operator to file for an IPO. The New York-based firm plans to plow all of the anticipated $2 billion IPO proceeds into funds it runs, which currently have about $27 billion in assets.