Survey Shows Hedge Fund Investors Ready to Provide Seed Capital

Dec 14 2010 | 10:00am ET

Demand for seed capital has risen and institutional hedge fund investors are showing an increasing willingness to meet it, according to the latest survey from the Preqin research group.

Preqin says the number of hedge fund investors expressing an interest in seed investments has increased from 11% in 2009 to 21% in 2010.

Preqin's Amy Bensted told FINalternatives the findings were based on data from 650 institutional investors.

Investors say the benefits of this type of investment—fund ownership, fee negotiations and early access to the next generation of hedge funds—outweigh the disadvantages in the current economic climate.

Preqin’s findings also suggest seed investments are evolving post-crisis, with investors injecting seed capital into more established vehicles that are having trouble raising funds or have lost assets in the crisis.

The survey also found that investors are less likely to trust managers with track records under two years (only 38% of respondents say they’d consider such managers, compared to over 50% in 2009).

At the same time, investors are more likely to consider investing in small funds—in 2009, 25% said they’d only invest in funds managing at least $500 million; in 2010, that number fell to 19%.

A full 72% of funds of hedge funds will invest with an emerging manager and another 13% would consider such an investment.

Bensted, manager of hedge fund data, said: “The industry contracted following the market crisis, and most funds lost assets. Investors have recognized this and are now willing to invest in smaller funds. Although investors are wary of investing in funds in their very early stages, fund managers that are able to build up a track record through investment of their own capital, or of a small fund, will be attractive to the institutional market.  In 2011 we can expect investors to continue to look at smaller, and indeed emerging fund managers, and more capital to flow into the sector.”


In Depth

Q&A: Executive Recruiter Talks Hedge Fund Closures, Hiring Trends

Dec 19 2014 | 6:58am ET

This year, hedge funds have been closing at a rate not seen since the financial...

Lifestyle

Cooper-Hohn Won't Contest Divorce Settlement

Dec 18 2014 | 9:51am ET

The ex-wife of hedge fund billionaire Christopher Hohn will not contest a divorce...

Guest Contributor

Alternative Investment Funds Face A Communications Imperative

Dec 19 2014 | 6:10am ET

A handful of the top alternative investment firms on both sides of the Atlantic...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.