Tue, Oct 17, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Today’s hedge fund seeding industry – comment from FCA

Monday, April 12, 2010
Opalesque Industry Update - Comment from Patric de Gentile-Williams, COO, FRM Capital Advisors

  • The hedge fund seeding industry today has fewer players and a higher quality pool of managers to choose from
  • Despite the increased barriers to entry, today’s market environment makes it a good time for the most talented managers to launch a new hedge fund
  • Through seeding, investors can benefit from both hedge fund returns and share in the economics of hedge fund managers
  • Proven records in delivering performance and controlling risk are important when selecting seed investments
  • Extensive research is key to ensure the best managers are selected
What’s changed in the hedge fund seeding industry?
With higher barriers to entry, the financial crisis has increased the number and quality of managers seeking seed capital. The outlook for hedge fund returns is better today than at any time in the last five years, making it a good time to launch a new firm – but finding the capital is a key challenge. Today, only the best managers are able to get seeded. Over the past few years, the number of active seeders has reduced dramatically and the calibre of the pool of managers has improved considerably.

Seeding funds give investors the opportunity to participate in returns of strong performing managers, while also sharing in their revenue streams. This year, institutional investors in particular have an increased appetite for investing in hedge fund seeding vehicles.

When reviewing an investment with a manager, investors now place more importance on the source rather than the amount of a hedge fund’s AUM. Assessing a manager’s investors or seed investor is high on their agenda. A well-respected seeder acts as a stamp of approval, providing institutional validation to managers and investors.

Identifying the right manager
The managers selected for seeding are likely to be those with proven records in both delivering returns and controlling risk. Stable teams who have previously worked together are more attractive than newly-formed teams. Managers also need to demonstrate the ambition, skills and determination required to run their own businesses and achieve institutional-quality standards in all areas of their operations.

The financial crisis has highlighted how important extensive research is. Seeding is complex and resource intensive. A large and diverse number of proposals must be evaluated to ensure the best candidates are identified. Seed deals also need to be negotiated and structured appropriately. The few firms that possess these skills and resources are well placed to deliver returns. Corporate website: www.frmcapitaladvisors.com

- FG

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. Regulatory - David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge, Carried interest tax: How much does it matter?, Odey sees 'terrifying' mix in MiFID, tapering, asset values, Hedge funds come together to share cost of MiFID and research, SEC turns up the heat on U.S. investment advisers, India's Sebi asks hedge funds to report investments in commodity derivatives[more]

    David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge From CNBC.com: David Stockman is warning about the Trump administration's tax overhaul plan, Federal Reserve policy, saying they could play into a severe stock market sell-off. Stockman, the R

  2. North America - Puerto Rico rejects loan offers, accusing hedge funds of trying to profit off hurricanes[more]

    From TheIintercept.com: Puerto Rico has rejected a bondholder group's offer to issue the territory additional debt as a response to the devastation of Hurricane Maria. Officials with Puerto Rico's Fiscal Agency and Financial Advisory Authority said the offer was "not viable" and would harm the islan

  3. Investing - WPP targeted by short-selling American hedge fund, Sun co-founder sells secretive hedge fund on big chip trade[more]

    WPP targeted by short-selling American hedge fund From Cityam.com: An American hedge fund has mounted a bet against WPP, the world's largest advertising group, with a trade worth almost £90m. Lone Pine Capital has built a short position worth 0.51 per cent of the FTSE 100 company,

  4. Hedge funds up as industry adjusts to rising rates[more]

    Komfie Manalo, Opalesque Asia: Hedge funds have reshuffled their portfolio after nearly four weeks of rising rates as the Lyxor Hedge Fund Index was up +0.2% from 19 September to 26 (+1.1% YTD), fuelled by strong results of global macro funds, Lyxor Ass

  5. Manager Profile - How the world's hedge fund king used 'idea meritocracy' to become a billionaire[more]

    From Forbes.com: In 1982, Ray Dalio made what he calls the biggest mistake of his life. He made a bet that there would be an economic collapse stemming from a debt crisis. And he was wrong. He lost money. He lost his client's money. He had to let people go from his firm and borrow money from his dad