Thu, Jun 30, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers April 2012

The Analytical View
Outlook for the hedge fund seeding industry

Rescuer funds

Many hedge fund investors require a hedge fund to have a minimum of $100m in AuM before they will consider investing in them. This is when seeder and accelerator funds come in. "Seeders/Accelerators agree to invest a large amount of assets into the hedge fund and, in return, they receive both [or either] the performance generated by the fund on their investment and a quasi-equity position in the firm, usually by sharing in the revenues on all assets of the fund," explains Agecroft Partners, a hedge fund marketer, in an article. "Seeders can generate significant returns if they pick a fund that performs well and significantly grows its asset base."

In a recent special report called "Start-Ups, Seeders and Strategic Stakes," Infovest21 delves into the trends underway in the seeding community as well as the outlook for 2012. Infovest21 is an information services company for the hedge fund industry.

According to Infovest21's report, half of the firms that seeded start-ups before 2008 have either left the industry or reduced the amount of seeding. The main challenges that seeders face are poor performance of seeded funds; strategies that are too crowded to raise money; short track records; the "Frontpoint experience" (which put into question the platform business model if one participant has a problem (in this case an insider trading investigation) that endangers the whole platform); and state regulations.

Goldman Sachs' Petershill is an example of a seeder having to deal with major challenges. The Petershill fund, founded in 2007 with $1bn, took minority investments in about 15 hedge funds, but many of them performed poorly or blew up. Goldman is now trying to sell the fund. Infovest notes the following new developments and outlooks for the hedge fund seeding industry:

1. Few large deals......................

To view our full article please login

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

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. Investing - Soros, Druckenmiller among hedgies profiting in market plunge, Hedge funds were most bullish on bonds since 2004 before Brexit, Surprise Brexit vote unleashes scramble for dollars, High-yield hit on Brexit but no panic selling, Scientist turned hedge fund founder lured to pound, euro, Hedge fund avoids commodities, posts big gains[more]

    Soros, Druckenmiller among hedgies profiting in market plunge From HITC.com: Bullish positions in gold and volatility and well-timed short bets on China and emerging markets, among other areas, were some of the trades that benefited hedge funds on Friday as markets digested Britons' s

  2. Manager Profile - A 26-year old hedge fund manager called Brexit — here's what he thinks about the historic vote[more]

    From Businessinsider.com: Taylor Mann is not your typical fund manager. The twenty-six year old Texas A&M graduate manages Pine Capital in Larue, Texas (population 160), where he resides with his three-year old daughter. Also atypical compared with many of the largest funds out there, Mann makes

  3. Europe - George Soros says Brexit has ‘unleashed’ a financial markets crisis, Brexit—what we know, Will the UK’s departure be a ‘soft-Brexit’ or a ‘hard-Brexit’?, Brexit: Six-point action plan for asset managers[more]

    George Soros says Brexit has ‘unleashed’ a financial markets crisis From Bloomberg.com: Britain’s decision to leave the European Union has “unleashed” a crisis in financial markets similar to the global financial crisis of 2007 and 2008, George Soros told the European Parliament in Bruss

  4. Hedge Fund Due Diligence Exchange offers complete due diligence reports at $1500[more]

    Matthias Knab, Opalesque: HFDDX is offering complete alternative investment due diligence reports at $1500 US. Industry professionals can simply go to www.hfddx.com and indicate their interest in sponsoring one or more DD Reports for $1500 each.

  5. Chesapeake Partners to liquidate hedge fund amidst 'hostile environment'[more]

    Komfie Manalo, Opalesque Asia: Chesapeake Partners Management, the hedge fund run by woman fund manager Traci Lerner said it would return investors’ money after 25 years because the market environment has become "hostile" to manage other people’s money, reported