Daniel S. Shapiro and Nicholas Fagge, Schulte Roth & Zabel International LLP
Pre-2009 seed capital opportunities and models
In the last six to seven years, the seed or strategic financing and sponsorship of new hedge fund managers became an extremely important factor in the rapid growth of new hedge fund management groups. Estimates of the amount of capital looking to invest in, and sponsor, start-up hedge fund managers credibly ranged up to $8 billion or more.
In this period, many new hedge fund management groups, with some significant experience and ‘track record’, found opportunities available from seed/strategic financing sources using a variety of different models:
(a) Various venture funds were organised specifically to invest in new hedge fund manager groups. Sometimes these venture funds were affiliated with a fund of funds manager, an investment bank or bank. Some were organized by more entrepreneurial groups not otherwise identified with a...