FCA has launched the Catalyst Fund, which it intends to close to new investors during 2008, to invest in early-stage managers and provide strategic guidance to assist managers in reaching institutional standards in areas such as governance & structuring, operations, compliance, risk management and technology.
The fund will also benefit by receiving a share of the underlying managers’ fee income – an arrangement that RMF Investment Management, the Switzerland-based fund of hedge fund subsidiary of Man Group, put in place for its RMF Global Emerging Managers fund late last year.
“The institutionalisation of the hedge fund industry is creating formidable barriers to entry for new managers,” said Blaine Tomlinson, group chairman of FRM. “The AUM levels and infrastructure required to attract investors has steadily increased, meaning that investment talent alone no longer guarantees success. More talented managers are seeking partners to reach the critical mass necessary to build thriving businesses, so we created a business that has the ability to invest significant amounts of capital.”
FRM Capital Advisors has been set up as a separately regulated entity with its own capital and investment team, while being able to draw on FRM’s 40-strong investment staff and 15 years’ experience in hedge fund manager benchmarking and evaluation.
Clive Peggram, who has 25 years’ experience in asset management, hedge funds, derivatives and venture capital as co-founder of Comvest, joins as CEO. Neil Mason, former CEO of BlueCrest Capital Management, will be chief investment officer and Patric de Gentile-Williams, founder of hedge fund platform PCE Investors, joins as chief operating officer.
“There has recently been a sea-change in industry dynamics,” said Mr Peggram. “Now, having seed capital is often seen as a mark of quality and durability by mainstream investors and is an invaluable platform for managers seeking to attract institutional investment.”
Although the academic literature offers mixed data and views on the subject, there is wide acceptance in the hedge fund industry that early-stage funds offer the best returns. Investors have become interested in the opportunity this represents, with CalPERS taking the lead in constructing an in-house fund of emerging hedge fund managers.
MS
