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Matthias Knab, Opalesque:

London based Tages Capital seeds managers across both developed and emerging/frontier markets and has invested approximately $600m across 12 funds over the past 3 years. In a White Paper, Tages says that if the right managers and strategies are selected, the seeding economics could equate to a 5-7% contribution to a target IRR of 12%-15% of the life cycle of a seed.

Low yield environment makes seeding increasingly attractive

The environment for hedge fund seeding and acceleration looks increasingly attractive relative to the low yields available from traditional investments. For those with a multi-year investment horizon, seeding or acceleration capital investments can help investors to decrease hedge fund investment costs and enhance returns by directly participating in a greater proportion of the industry economics.

The industry investor base has changed materially since the global financial crisis, with a significant increase in institutional investors and consultants focused on larger funds. The introduction of regulatory restrictions on global banks investing in hedge funds and a decline in the number of fund of hedge funds has resulted in a scarcity of dedicated seed capital providers, particularly in mid-size transactions.

There continues to be a strong pipeline of high quality talent, often second generation managers with hedge fund experience attracted to the still high margins available in the industry. At the same tim......................

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