Hedge Fund Incubation and Seeding. A perspective for 2009
Wednesday, May 13, 2009 : Permalinkhedged.biz – In 2006 if someone suggested that it was a good idea to be seeding and incubating hedge funds, I would have been highly skeptical. Managers who were any good were raising large amounts of capital on their own on day one, mediocre managers were able to start with credible amounts of day one capital and even managers who while talented had no idea how to run an investment management business could get into business. The hedge fund seeder faced insurmountable adverse selection problems.
Hedge fund managers willing to give away either a share in their management company or a share of their fees tended to be of lower quality. You didn’t want to be seeding them.
Hedge fund managers of good quality but who understood the business development support role of a seeder and were happy to work with one were labeled as poorer quality and found it difficult to raise capital, so also were from a business perspective, less attractive to a seeder.
Tags: adverse selection, business development support, business perspective, fund-managers, hedge fund, investment management business, management-company, selection problems
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