Sat, Dec 10, 2016
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. Institutions - Texas County & District culls 5 hedge funds, reallocates to existing managers, Kentucky board gives final approval to halve hedge fund portfolio, $38bn Finnish fund moves assets to U.S. as Europe flounders, South Korea’s National Pension Fund holds 5% stake in 62 listed companies[more]

    Texas County & District culls 5 hedge funds, reallocates to existing managers Texas County & District Retirement System, Austin, continues to reduce the number of hedge funds, but not the size of its $6.2 billion hedge fund portfolio. It will redeem a total of $760 million from five hedg

  2. Opalesque Roundtable: Australian family offices search for good risk adjusted returns, happy to pay for skill[more]

    Komfie Manalo, Opalesque Asia: Australian family offices want foremost good risk adjusted returns, and they are happy to pay for the skill, and in some cases, the limited capacity of an active manager. Jonas Daly, Head of Distribution at B

  3. StepStone announces close of Swiss Capital acquisition[more]

    StepStone Group LP announced it has successfully closed the acquisition of Swiss Capital Alternative Investments AG, one of the leading private debt and hedge fund solutions providers in Europe. The transaction was originally announced in May 2016, and has been in the process of receiving regulatory

  4. Investing - Stephen Cohen investing $275m in free clinics treating veterans' mental health issues, California Resources loses favor with hedge funds[more]

    Stephen Cohen investing $275m in free clinics treating veterans' mental health issues From Healthcarefinancenews.com: …Now, a new chain of free mental health clinics for vets has opened in five cities across the United States to fill the gap. The much-needed new treatment is underwritten

  5. Hedge funds flat in last week of November 'in sympathy with markets’[more]

    Komfie Manalo, Opalesque Asia: Hedge funds were close to flat in the last week of November in sympathy with markets, which took a pause ahead of the OPEC meeting and Italian referendum. The Lyxor Hedge Fund Index was -0.1% as of end November 29 (-1.7% YTD), according to the latest