Fri, Oct 9, 2015
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:

- 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. Manager Profile - Pimco alternative funds flourish as 30-year bond rally fades[more]

    From Inside Pacific Investment Management Co., the bond behemoth that lost two chief investment officers last year and saw almost $500 billion of client money leave, a hidden profit engine is easing some of the pain. For more than a decade, Newport Beach, California-based Pimco has qu

  2. Niche Investing - Art investment funds: Attracting institutional and other new investors[more]

    From The Deloitte/ArtTactic Art and Finance Report 2014 (the "Art and Finance Report") noted that the "global art investment fund market was estimated to be worth at least $1.26 billion in the first half of 2014." This seems almost inconsequential when juxtaposed with the $54 billion of

  3. Hedge fund Barnegat survives September’s market selloff[more]

    Komfie Manalo, Opalesque Asia: Bob Treue’s $679 million Barnegat Fund proved resilient after another month of market letdown as the hedge fund gained 2.2% last month, bringing its year-to-date gains to 2.8%. Treue said in his monthly report to i

  4. …And Finally - Japanese men want upgrade on their virtual girlfriends[more]

    From Five years after News of the Weird mentioned it, Japan's Love Plus virtual-girlfriend app is more popular than ever, serving a growing segment of the country's lonely males -- those beyond peak marital years and resigned to artificial "relationships." Love Plus models (Rinko

  5. Hedge funds relatively resilient in Q3[more]

    Komfie Manalo, Opalesque Asia: Hedge funds fell in the third quarter as market conditions remain challenging, but still outperformed the S&P 500. The Lyxor Hedge Fund index was down 3.6% during Q3 while the S&P 500 fell 8.2%. According to Lyxor, "hedge funds were quite resilient in Q3. Falling en