Thu, Oct 30, 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. Manager Profile - Seth Klarman: Lessons for retail and institutional investors[more]

    From Valuewalk.com: Seth Klarman is virtually unknown outside value circles, despite his impressive record and value of assets under management. On average Baupost has returned 19% p.a. despite holding a large portion of its assets in cash. During the financial crisis, Seth Klarman’s funds lost some

  2. North America - FATCA leads 75% of U.S. expats to consider dropping citizenship[more]

    From International-adviser.com: Nearly three quarters of American expats are considering the renouncement of their citizenship following July’s introduction of the “absurd” Foreign Account Tax Compliance Act (FATCA). The findings, which were revealed in a survey by deVere, come alongside the news th

  3. Goldman in talks to acquire IndexIQ[more]

    From Bloomberg.com: Can Goldman Sachs put ETF investors on a liquid diet? Goldman is in talks to acquire IndexIQ, Reuters has reported. Index IQ is a small exchange-traded-fund firm known mostly for products that replicate hedge fund strategies, called "liquid alternative" ETFs. While IndexIQ has 11

  4. Other Voices: CALPERS dilemma should be a warning to hedge funds wanting institutional investors[more]

    From Ian Hamilton, founder of IDS Group. A quick comment on the CALPERS’ disinvestment from the hedge fund market and the jitters it is causing. Pension Funds should not be sheep and follow CALPERS’ decision as the issues that CALPERS has with hedge fund investments are in many ways unique t

  5. Hedge funds fell 1.18% in September on Fed tightening and ECB loosening[more]

    Komfie Manalo, Opalesque Asia: Hedge funds fell 1.18% in September on Fed tightening and loosening of the European Central Bank’s policy on equity markets, according to the Barclay Hedge Fund Index co