Will incubated hedge funds finally be seen as more than puppets?

Thu Nov 5, 2009

As new fund launches look set to explode next year, InvestHedge explores the bewildering myriad of start-up options on offer to emerging managers

By Niki Natarajan

Pinocchio is the story of a wooden puppet that became a real boy after he had proven himself. Until now, many start-up hedge funds have disdainfully viewed incubators as the hedge fund equivalent of being a marionette, rather than a leg up to being a real hedge fund.

This myth was, in part, perpetrated by prime brokers that in the past divided hedge fund prospects into an A-list and B-list, with the latter being sent off to the seeding and incubating platforms, and the former, being coveted for future trading returns, introduced to the big investors. But following the market collapse, the capital introduction function at prime brokers has changed, and so too the profile of the hedge funds that they will actually work with these days.

Seeding itself, which does not have to involve equity stakes, has always been an essential part of hedge fund launches....

ISSN: 2151-1845 / CDC10004H

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