Mikael Nilsson

SEB is a merchant bank headquartered in Sweden. It has been seeding hedge funds since 2003 and runs two seeding funds, and the two funds have similar structures: Manager Catalyst Fund I (MCF1) was launched in April 2010. It was open for subscription for three months, during which investors committed $280m. SEB drew the capital as they needed it during a year and invested in seven funds. MCF1 is now fully invested.

There was more demand for this type of vehicle among Nordic institutions, so Manager Catalyst Fund II (MCF2) was launched in October 2012. It was open to new investors for three months as well, who committed $300m. MCF2 has done five investments so far and still has two or three more to do. SEB has so far divested from one of the funds, but all the others are still live.

According to Mikael Nilsson, co-portfolio manager of the two seeding vehicles, divested money might go in the current funds or in new ventures. Moreover, each investment that SEB does has a two-year lock up, which means that investors' lock-up may be longer.

SEB does invest in Day-One deals, but prefers acceleration deals generally. The group usually invests between $25m and $50m in each fund, and the aim is to build a diversified hedge fund portfolio with an economic interest on top.

"Each deal we do is evaluated from several angles but generally we look at it from: 1) standalone merits, 2) portfolio contribution and 3) economic deal," Nilsson told Opalesque. "All three needs to be fulfilled for us to do a deal, and if we cannot create a win/win situation for our fund and the managers, the deal is off.  In the economic deal, we prefer gross revenue sharing, however we are flexible and each deal is unique in many ways to address th......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.