Does anyone have experience attracting seed money for a Hedge Fund start-up

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March 15, 2021

by a searcher from Maastricht University - School of Business and Economics in Fribourg, Switzerland

I have to legal structure, the people, the software, the knowledge - but I need to attract the seed money. We run 2 very sophisticated proprietary black boxes that have been fed with our Algos focused on the FX market.

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Reply by a searcher
from Westminster College of Salt Lake City in Salt Lake City, UT, USA
Do hedge funds still fall into the Alternative Investments Asset Class (Alts)? I've never heard of an LP who allocates to a PE/VC GP to help them get off the ground in an Alt being called a "Seed" Investor, we call them Anchor Investors. I don't know how useful my comments will be because I may not be comparing apples to apples. When I was with Goldman Sachs back in the '04-'07 timeframe Hedge Funds were still considered an Alt but I think they've fallen into their own Asset Class. Anyways, from the little information available it sounds like a "First-Time Fund" instead of a "Spinout", which carves out 60-70% of the mandates allocating to this space & probably 95% of the institutional capital. Being a first-time fund puts you at a significant disadvantage, even though first-time funds have outperformed seasoned GPs by a wide margin in 10 of the past 11 years. The good news, at least in the PE/VC or secondaries Alts you can kick the first-time label just by putting some capital to work & showing paper gains. I would imagine with hedge funds its the same principal but it seems to me that with a hedge fund you wouldn't need $2m-$3m just to make a single investment to start building a track record with the thesis, due to the liquidity and price per cusip, hopefully your algos don't require significant trading volumes to work. Given those assumptions, the very best advice I can offer is to pool anything together you can, like anything, every dime you can spare, every dime every single person on your team can spare, plus friends, family and fools (FFF), hold a first close & just get the capital to work, run the algos and start producing paper gains & a track record for your thesis. Then you're not a First-Time Fund anymore and if the algos work, LPs will be throwing money at you. The entire game is about getting started, however small it may be, the fact that there will be data to look at, you are no longer asking investors to be "first", you have skin in the game, you are doing "something", which shows you know how to survive & so on, will shift the balance in your favor. Happy to talk more if you'd like. redacted
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Reply by a professional
from Fordham University in Houston, TX, USA
Hi Enno, I am an investment funds attorney in the U.S. (including hedge funds) - if you would like to have a chat I would be happy to talk you through the process and issues involved in finding a seed investor for your fund. Please feel free to email me at redacted
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