Depending on who you speak to in the hedge fund industry, seeding new managers is viewed very differently. Investors have a broad spectrum of views: some are converts, and actively invest considerable time and resources to find new investment talent, while others will require a fund to be up and running with a one to three year track record before they will consider it. But there is more to the seeding process than simply finding the manager, and being one of the investors who backs him from the start, providing so-called ‘seed capital’. A seasoned seeder of hedge funds will also be looking to profit from the success of the fund as a business, not simply earning a return from the assets managed by its principals. A typical seeding arrangement will involve a fund of funds seeking a share of the fees the manager earns as well as potentially taking an equity stake in the business. Capital invested by the seeding company is not considered to be working capital for the fund management company.
The following is on :
http://www.thehedgefundjournal.com/magazine/200811/profile/the-art-of-seeding-rmf-hedge-fund-ventures.php
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