Hedge Fund Seeding Panel: Alpha Hedge West Conference ~ market folly

Monday, September 23, 2013

Hedge Fund Seeding Panel: Alpha Hedge West Conference

Next up in our series of notes from the Alpha Hedge West Conference is the panel on hedge fund seeding and it featured Rachel Minard (Minard Capital), Jeffrey Cozad (Stonerise Capital), Basil Williams (Mariner Investment Group), and Jonathan Miles (Wilshire Associates).

Hedge Fund Seeding Panel: Alpha Hedge West Conference

RM> Need for infrastructure.  Allows managers to get started.

BW> Incubation model.  Lots of regulatory requirements.  Has changed paradigm.  Take away business risks so manager can focus on investment risks.  Last 12 months 340 teams have applied, 140 made second round, 50 made 3rd round 10 made 4th round and 3 were funded.  After 1 to 18 month period, they will be funded at $100M and Co-Branded.

JC> Seeding experience:  Started with $50M in capital.  $15M from partners and $35M from others.  Different types of seed opportunities.  Some own GP, some just want rev share.  Some come with money others come with marketing.  Types of demands seeds have include Governance.  Buyout.  Keyman, Position Transparency.  Decided to bring in $100M partner.  No single right answer.  Partner remains great partner.

JM> Do you want to invest in a seeded firm or seed a firm?  A $4M dollar manager would need both an investment plan and a business plan.  Investment with seeded firm with $150M is good because of vetting and because seeder is stuck where investor can leave.

BW> Looking for firm with strong investing process.  Strategies need Billion dollar potential.  How marketable are the managers?  Exudes confidence and poise and communicates clearly.

JM> Biggest change in industry is "Institutionalization".

JC> Days of raising $50M to $100M and then going from there is gone.  Seed is no panacea.

RM>Proof is needed now.  Track record not enough.  Now have to show how you got that and have to show it is replicable.

Be sure to check out the rest of our summary of the Alpha Hedge West Conference.

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