PE Fund Seeding
Over the course of our professional careers our evolving team of principals and associates have earned hard-won insights into the structure and workings of our core markets, and the nature of their participants. As a result we feel confident that we can make reliable qualitative judgements about individuals who are seeking to establish first time PE funds and both qualitative and quantitative judgements about their particular investment strategies.
Significant academic research suggests that first time managers outperform more established managers as the latter tend to lose motivation, or their fund size outgrows the boundaries of their natural opportunity set, “strategy drift” threatens, and raising the next, larger, fund is prioritised over performance. Combined with risk averse LP’s for whom an investment in an established fund is easier to justify, the industry suffers a bias toward the propagation and maintenance of large funds with middling performance. Talented first time managers are crowded out by this effect and forced to seek employment with incumbents, this is de-motivating for the individuals concerned, and it might readily be concluded that energy and talent is lost.
In combination with our family office and UHNWI relationships we are seeking to support high quality first time managers through a JV structure and cornerstone funding. We are particularly focussed on emerging market strategies but will also consider opportunistic strategies in Western Europe (e.g. stressed/distressed opportunities). In order to fully align incentives, prospective managers must be prepared to make a personally meaningful financial investment in the asset management company.