Incubation Exit Strats: Consolidation Comes Into Play

May 25 2006 | 8:32pm ET

Traditionally, when an emerging hedge fund manager teams up with an incubator and exchanges equity for operational capital, the manager's long-term plan is to buy back control of the fund. While this is still a common goal, consolidation in the hedge fund industry has caused some savvy incubation firms to structure deals which they believe will be more profitable to both them and the managers in which they invest —selling the firm to a third party.

Westport, Conn.-based Weston Capital, which was founded by Albert Hallac in 1993, launched its first incubation fund in 2004 and has thus far seeded around eight managers. Chris Kelley, chief executive officer, explained that Weston Capital selectively seeds managers with proven track records and solid business plans, but one thing that sets the firm apart from other hedge fund incubators is its vision for an exit strategy.


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