The creation of a thousand forests is in one acorn

Fri Jul 27, 2012

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Many up-and-coming asset managers are facing more problems than ever before when it comes to attracting money into funds. In many ways most small funds are getting caught in a Catch-22: they don't attract assets simply because they are small.

It is a vicious circle  within which asset managers can't attract investment flows unless they are of sufficient scale and size, and they can't grow unless they hit the milestone of around $100 million - if not more.

All professional investors know that there are many advantages to investing in emerging managers - early-stage managers on average tend to deliver higher returns than established players and there is anecdotal evidence to suggest that early-stage managers have indeed consistently outperformed significantly established managers.

The French government, along with several major investors, has assisted in the creation of the Emergence seeding platform. The government's motivation is because it realises the significance that a robust asset management industry can have in creating a healthy economy.

Seeders like Emergence enable a UCITS-compliant alternative fund to reach critical mass - which should eventually result in more investor inflows - and hopefully a healthier up-and-coming asset management industry - though France may be a questionable example if it has an industry that is also saddled with a transaction tax.

An example of what Emergence has been doing is the UCITS-compliant version of the Diva Synergy strategy, the merger arbitrage and pre-event strategy managed by Paris-based Bernheim, Dreyfus & Co, which has been one of the first asset managers to take advantage of using the Emergence seeding platform.

Other European countries with a significant asset management industry should perhaps also develop their seeding platforms for local asset managers - and the UCITS wrapper should be the ideal tool to use because of its established regulatory framework.

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ISSN: 2151-1845 / CDC10004H