Thu, Jul 16, 2020
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers June 2019

PERSPECTIVES: It is going to be increasingly common that the biggest and the best hedge fund launches are backed by seed capita

 

It is going to be increasingly common that the biggest and the best hedge fund launches are backed by seed capital

Gerhard (Gary) Anderson, a partner at US law firm Seward & Kissel, shares his thoughts and outlook for the hedge fund seeding landscape. He was part of the team who drafted the Seed Transaction Deal Points study. The study shows that, in seed deals between 2014 and 2018, the alignment between seeders and managers has improved in various areas such as more working capital support, seed capital lock-up periods, and liquidity rights for seeders in case of harmful events.

Opalesque: The study shows that in observed seed deals between 2014 and 2018, the alignment between seeders and managers has improved. Do you think there is room for further improvements, and in which areas? Gary Anderson: The best way to look at it is by framing the key drivers of alignment into two pockets. In one are changes in "degree" and in the other are changes in "kind". Opalesque: What about changes in degree? Gary Anderson: In respect of changes in degree, one can certainly imagine enhancement and alignment coming from seeders bearing a greater amount of working capital - so, instead of, for example, the economic effect of $2m, it is $3m. You can also see the lockup becoming longer or a hard-lock for a couple of years followed by a soft-lock (e.g., where one has to pay a penalty of 3 or 4% of the assets to redeem early). Also, when seeders do redeem their money, particularly in a stressed situation, the redemption could roll into ordinary liquidity versus accelerated liquidity. There is still some price-discovery needed to reach an equilibrium in the market place for these types of terms, as seeders and managers head towards something that is really more of a partnership with strong alignment, as opposed to a relationship that, historically, had been more of a passive ownership stake weighted to the benefit of the seeders.

Opalesque:......................

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. Satori Capital buys into hedge fund manager Mountain Cove Capital Management[more]

    Laxman Pai, Opalesque Asia: Dallas-based alternatives manager founded on the principles of conscious capitalism, Satori Capital has agreed to back compatriot investment firm Mountain Cove Capital Management. Satori, a multi-strategy firm with more than $1 billion in assets under management, co

  2. SEC proposes to amend Form 13F[more]

    B. G., Opalesque Geneva: The Securities and Exchange Commission (SEC) said on Friday that it had proposed to amend Form 13F - for the first time in more than 40 years. The proposal will update the reporting threshold (currently at $100m) for institutional investment managers and make other change

  3. News Briefs: An amateur investor turned $15,000 into $1m then lost it all, the latest cautionary tale in the day-trading frenzy, SoftBank-Backed Beike Zhaofang Aims to Raise $3bn in U.S. IPO[more]

    An amateur investor turned $15,000 into $1m then lost it all, the latest cautionary tale in the day-trading frenzy From Business Insider: Robinhood-user Richard Dobatse said he turned $15,000 into $1 million, and then lost everything. He told the New York Times: "They make it so easy fo

  4. PE/VC: Could this new metric upend private equity compensation?, Venture funding remains elusive for Black tech entrepreneurs in the US, Fintech to drive biggest VC exits over next five years, Second-quarter VC investing totals appear lackluster[more]

    Could this new metric upend private equity compensation? From Institutional Investor: A secondaries investor and public pension fund are publishing what they say is the first methodology for calculating the dollar value of excess returns generated by private market investments. The

  5. Activists: Effissimo tells Toshiba that shareholders make good directors, Japan activist calls in SPV cavalry for small-cap attacks[more]

    Effissimo tells Toshiba that shareholders make good directors From Reuters: Effissimo Capital Management, which wants to install three directors on Toshiba Corp's board, told the Japanese conglomerate's directors that shareholders make good board members because they are invested in the