Sat, Dec 3, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Seeders FRM believe positive hedge fund seeding environment set to continue in 2011

Monday, February 14, 2011

Patric de Gentile Williams
Opalesque Industry Update – Comment from Patric de Gentile-Williams, COO, FRM Capital Advisors (FCA) Quality of hedge fund managers seeking seeding capital will continue to improve, which, in turn, improves investors’ potential returns. Higher cost of launching a hedge fund today means that a strategic investor is becoming critical for a successful launch.There are signs that investors are increasing their allocations to hedge funds with AUMs, which is good news for seeding vehicles.

Expectations for 2011
We expect the number and quality of managers seeking seed capital to continue to improve in 2011. The wave of proprietary traders spinning out on their own as a result of regulatory changes will increase the talent pool at the top end of the quality spectrum. With markets stabilising, we also believe that more people already in the hedge fund industry will have the confidence to launch their own funds.

The higher cost of launching a hedge fund today means that a strategic investor has become a critical element for a successful launch. Strategic investors, of which seeders are a major type, give new funds a solid foundation from which to launch and grow. A credible day one investor provides validation that encourages other investors to conduct their own evaluations.

Starting and running a successful and independent hedge fund continues to be an ambition for many of the most talented investors. Many ‘new’ hedge funds are teams who have worked together for years and have proven success in running money and controlling risk. These teams, as well as established teams who want to continue with the same strategy in a new construct, are attractive to seeders.

FCA’s approach
Our approach to investments is entirely talent-driven. However, top-down considerations of portfolio diversification, likely future investor appetite for a strategy and risk characteristics for proposed funds also impact the manager selection process.

We look for managers who demonstrate the ambition, skills and determination required to run and grow their own businesses and achieve institutional-quality standards. Scalability of the strategy, the manager’s marketing skills and perceived business acumen will also contribute to any decision.

We will continue to avoid more illiquid strategies and we stay away from directional strategies, which can create volatile performance.

Outlook for hedge fund seeding
If the hedge fund industry continues to produce similar returns to recent years and the appetite for hedge funds continues, the prospects for seeding are excellent. Well structured, smaller funds run by established teams are set to benefit. There are signs that investors are increasing allocations to hedge funds and diversifying away from the mega-size multi-strategy funds. Seeding funds give investors the opportunity to participate not only in the returns of high quality managers, but also to benefit financially from their growth through revenue share arrangements. Our models suggest that the incremental return from revenue-shares can double the potential returns. With the quality of managers seeking seed capital improving, this, in turn, improves investors’ potential returns.

We are confident that 2011 will bring more outstanding managers, enabling us to give investors exposure to a diversified portfolio of growing funds with exciting strategies. www.frmcapitaladvisors.com (Press release)
bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. M&A - AllianzGI to acquire Sound Harbor Partners, SS&C completes acquisition of Wells Fargo's Global Fund Services business[more]

    AllianzGI to acquire Sound Harbor Partners Allianz Global Investors (AllianzGI), an active investment manager, announced that Sound Harbor Partners, a US private credit manager led by Michael Zupon and Dean Criares, have agreed to join its fast-growing Private Debt Platform. Under the te

  2. Europe - UK investors to pay more tax on money in offshore funds, Do you want to hand your money to super-algo or a Swiss banker?[more]

    UK investors to pay more tax on money in offshore funds From FT.com: Hedge funds in Dublin and Luxembourg are set to be hit by new rules that will force UK investors to pay more tax on the money they hold in offshore funds. As part of the government’s Autumn Statement on the country’s fi

  3. Hunt for yield pushes more investors into riskier assets[more]

    From FT.com: Pension funds and insurance companies have increasingly embraced riskier assets in their hunt for higher returns over the past five years. Alternative assets such as property, infrastructure, private equity and hedge funds have been bought up by institutional investors in a world where

  4. People - Nectar Financial hires senior investment team, Texas A&M replaces retiring foundation investment chief, Ex-Cadwalader partner Woolery makes another sudden exit, How to become a Python coder at a top hedge fund, by the co-CTO of Man AHL[more]

    Nectar Financial hires senior investment team Nectar Financial AG, a Swiss financial technology company for wealth and asset management, has announced that it has hired two key senior leaders to spearhead its digital asset management efforts. The company also announced that it has entere

  5. Activist News - Cognizant has introductory discussion with activist investor Elliott; to review letter, Starboard Value makes huge investment in Hewlett Packard, Hedge fund calls for removal of First NBC Bank CEO[more]

    Cognizant has introductory discussion with activist investor Elliott; to review letter From Indiatimes.com: Cognizant said it had an introductory discussion with Elliott Management after receiving the activist hedge fund's letter asking for a board shakeup, a buyback, a dividend and chan