Fri, Nov 21, 2014
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. Legal - Hedge fund manager fights £8m tax tribunal ruling[more]

    From FT.com: A hedge fund manager who may have to repay £8m in tax is trying to overturn a tribunal ruling that found he had attempted to shelter millions in an avoidance scheme. Patrick Degorce, chief investment officer at Theleme Partners, lost a tax tribunal case last year. HM Revenue & Customs c

  2. Europe - Hedge funds face exit tax as Iceland central bank discusses plan[more]

    From Bloomberg.com: Hedge funds and other creditors with claims against Iceland’s failed banks face an exit tax as the island looks for ways to unwind capital controls without hurting the economy. The government targets having a plan it can present by year-end that would map out how Iceland will sca

  3. Investing - George Soros puts $500m of his money on Bill Gross, Soros, Paulson backed Hispania Activos mulls Realia takeover, Ex-Credit Suisse trader’s hedge fund sees yen shorts as crowded, Hedge hunters double default-swaps as views split, Large hedge fund positions come under pressure, Vikram Pandit's fund picks 50% stake in JM Financial's realty lending arm for $87m[more]

    George Soros puts $500m of his money on Bill Gross From WSJ.com: Before Bill Gross was fully settled in at his new firm, Janus Capital Group Inc., he received an unlikely visit from the chief investment officer of famed investor George Soros ’s firm, according to a person familiar with t

  4. Opalesque Exclusive: Gray Ghost Ventures aims to make impact investing commercially viable[more]

    Bailey McCann, Opalesque New York: At a time when investing in emerging markets may be falling out of fashion among some investors, Gray Ghost Ventures is confident that great opportunity exists in the emerging markets. The firm may have a unique view into this space as one of the first private

  5. Gross: Inflation is required to pay for prior inflation[more]

    Benedicte Gravrand, Opalesque Geneva: As inflation rises, every dollar will buy a smaller percentage of a good. While deflation will mean a decrease in the general price level of goods and services. These two economic conditions are both in the waiting room. The consensus would like the former to