Thu, Dec 18, 2014
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. Investing - Big hedge funds win again on PetSmart, Riverbed, RBS sells real estate loans to hedge fund Cerberus, Talisman energy speculation: Which hedge funds could benefit?[more]

    Big hedge funds win again on PetSmart, Riverbed From CNBC.com: Another week, another set of wins for activist investors. On Sunday, pet supply retailer PetSmart agreed to the largest leveraged buyout of the year at $8.7 billion. Hedge fund firm JANA Partners had been pushing for a sale a

  2. Outlook - Hedge fund manager who remembers 1998 rout says prepare for pain, Bond guru Bill Gross predicts U.S. economic growth to dip to 2%[more]

    Hedge fund manager who remembers 1998 rout says prepare for pain From Bloomberg.com: Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia. He was soon working around the clock when investors began targeting the region’s

  3. Opalesque Exclusive: U.S. legal receivables fund launched in August[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Investing in asset-backed receivables is a strategy that has been an integral part of the alternative investment space within the overall fixed income asset c

  4. Comment - High fees and low performance hit hedge funds[more]

    From FT.com: Disenchantment over high fees and lackluster performance may finally be turning the tide against hedge funds, fresh data suggest. Despite generally weak returns since the global financial crisis, hedge funds have enjoyed positive net inflows every year since 2010. This helped assets und

  5. Performance - Lansdowne, Man Group, other hedge funds profit from shorts in oil, Turmoil boosts hedge funds that bet against Russia, oil, CTAs post strongest returns since December 2010[more]

    Lansdowne, Man Group, other hedge funds profit from shorts in oil From Valuewalk.com: The rising short interest in oil companies implies that the worst for oil is yet to come. Data from Markit shows that short exposure in energy sector of S&P 500 is still looming close to the highest mar