Sun, Oct 23, 2016
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. (Press release)

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 - U.S. hedge fund HarbourVest is shock winner in the £1.1bn SVG Capital takeover saga, Hedge fund Parvus shows hand, toppling William Hill merger deal[more]

    U.S. hedge fund HarbourVest is shock winner in the £1.1bn SVG Capital takeover saga From The fierce battle to buy Britain's biggest private equity group has come to an unexpected conclusion, with the original bidder walking away with the prize. SVG Capital has agreed

  2. Marc Lasry: Energy is still a phenomenal opportunity[more]

    From Distressed debt specialist Marc Lasry said energy debt is still a "phenomenal opportunity" because investors can get "massively overpaid" for the risk they take on. There are "huge opportunities" in the energy sector especially in restructurings, the Avenue Capital Group CEO said Tues

  3. Opalesque Exclusive: Ex-SAC manager re-emerges with market neutral hedge fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: A manager re-emerged from the SAC battleground last year to launch his own hedge fund under the umbrella of New York-based investment firm Endicott Group.

  4. North America - Hedge-fund manager Kyle Bass says the U.S. is on track for stagflation, Billionaire hedge fund titans Dinan, Lasry on election, markets and best investment ideas[more]

    Hedge-fund manager Kyle Bass says the U.S. is on track for stagflation From Kyle Bass, founder of Hayman Capital Management, on Wednesday warned that the U.S. is headed toward so-called stagflation. Stagflation is typically described as persistently high inflation and hi

  5. Macro hedge funds up 3.3% in one week on Fed and Brexit pays off[more]

    Komfie Manalo, Opalesque Asia: Hedge funds were boosted by the strong performance of global macro funds, with the Lyxor Global Macro Index gaining 3.3% as of the week ending Oct. 11 (-1.7% YTD), Lyxor Asset Management reported. Their short on the p