Industry Analysis

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

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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,