President's Blog

Hedge Fund Seeding in a Capital Constrained Environment

August 9, 2011
post contributed by Megan Flynn

Three industry experts came together to discuss the current Hedge Fund Seeding Environment for our June NYHFR Event. The panel consisted of Ted Seides, President of Protégé Partners and Greg Hall, Managing Director of the Blackstone group, with David Solomon, Global Co-Head of Capital Introduction for Goldman Sachs moderating.

The night began with an informative introduction into the history and “rich tradition” of Hedge Fund Seeding, with a focus on several occurrences in the past few years. It was acknowledged that there is substantial undeployed capital looking to be invested into hedge funds, however, who that capital is allocated to is the real issue for new managers.

The biggest funds have an insatiable demand to continue getting bigger, Seides said, most of that capital goes to making funds bigger, there’s not a lot left for start up funds. The need to get big very quickly is very important, Seides added. Investors will pull their money in the first 18 to 24 months if they don’t see performance and growth.

The crisis did create a capital crunch, Hall acknowledged, however, there are a lot of pent up entrepreneurs that have been waiting until now to come out. Despite Hall’s bullish outlook on new potential hedge fund talent, Seides depicted an over saturated market saying, “this might surprise you all, but the world doesn’t need another hedge fund”, explaining that there is very little differentiation between funds out there (little price difference, no competitive advantage, etc.).

Closing the night, members eagerly began a lively Q&A portion, which led into a discussion based on one of the roundtable’s founding intentions. The panelists stressed the importance of Hedge Fund Seeders maintaining strong personal networks. Both Seides and Hall agreed that the best business introductions and opportunities have come from their own networks.

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