Opalesque Industry Update - Comment from Patric de Gentile-Williams, COO, FRM Capital Advisors|
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 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