“Mighty oaks from little acorns grow” – a proverb
Launching a fund, especially without the assistance of an established asset manager, is challenging.
Speak to any fund managers that have considered it or achieved it and they will say that the hurdles involved are immense. It is labour intensive, the financial regulatory burden has increased enormously since the well known events in 2008 and the initial and ongoing costs are expensive.
Investor demands have also shifted and once a fund is up and running it is far from clear if many of them will be interested in the new offering.
Most institutional investors, unless a superstar fund manager is involved, want a fund to establish a track record and build assets of at least $100 million before they will even consider writing larger tickets.
Seeding platforms, where costs and risks are shared, can resolve some of these issues. Many seeding platforms, developed along the lines of geographical regions or strategy, already exist for offshore hedge funds – and could be developed or extended for the major UCITS fund domiciles in Europe.
The domiciles need to highlight their support for what is still a fledgling sector – not necessarily along national lines – and support some of the best managers within Europe and beyond. Doing so, they may give hedge fund managers the space to take a risk and bring a strategy onshore or develop a new one– while offering investors a chance to invest at what is often the most exciting period for a fund.
An example of this is the setting up of Emergence, with the assistance of French government, which aims to strengthen and develop the alternative asset management sector in that country over the long term. The Dutch government, via ABP and APG Asset Management, has also supported the development of a similar seeding platform via the IMQubator group.
A seeding UCITS platform, if done right, can create an entrepreneurial spirit and could result in more innovation as well as a more exciting asset management industry across Europe.
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