Netherlands-based seeding platform IMQubator has a simple mission: to deliver high absolute returns to its investors by investing in new, up-and-coming investment managers. The multi-manager fund uses a structure comparable to a joint/shared account. IMQ Investment Management is investment manager, selecting and managing each new addition to IMQubator and actively monitoring them on a weekly basis.
“We demand that in their first years of operation new teams establish their business centre on the same office floor as IMQ,” says the firm’s chief executive, Jeroen Tielman (pictured). “This enables us, among other things, to have weekly CIO-to-CIO meetings with emerging managers and monitor their business development closely.”
Alongside Tielman, other members of the IMQubator team include chief investment officer Rikard Lundgren, chief operating and financial officer Remco Zomer, and Quirijn van de Weg.
Most institutional investors often avoid investing in emerging managers with no established track record and possibly a small volume of assets under management. Nevertheless, IMQubator believes nimble start-ups offer some interesting characteristics, most notably higher returns. The new kids on the block are driven to outperform their established peers, and in doing so attract assets.
“We believe that experienced investment managers who leave their employer to start their own asset management boutique generate a higher return for investors in their first years of independent operation compared with returns generated by mature hedge fund managers,” Tielman says. “This difference could amount to between 2.5 and 5 per cent annually.”
The seeding model used by IMQubator involves committing EUR25m against reduced fees in a three-year lockup. A 25 per cent stake in the selected fund’s management company then gives IMQubator’s investors a chance to benefit actively from the fund’s growth. Emerging managers must, however, buy in to IMQubator’s philosophy of ‘guiding and monitoring’.
As all of the funds selected are located in the same Amsterdam office space as IMQubator, it allows the firm to mitigate risk by closely monitoring managers’ performance. Different limits are set with individual managers to minimise investment-related risk.
It’s this approach to close risk monitoring and business guidance that, in IMQubator’s view, adds value to its investors. “We assist with the design of fund governance, providing end-investors with more power in case misalignment of interests occurs between the manager and the investor,” Tielman says.
To help its fund managers grow and attract assets, IMQubator is available for meetings with prospective investors as well as sharing due diligence; the firm has full transparency on the trading positions of each fund.
Currently, IMQubator’s portfolio consists of seven funds across a range of strategies. Capital is available to seed a further three funds, which will likely happen in the second and third quarters of this year. In terms of optimal size, the portfolio can accommodate up to 15 emerging managers. To support growth, IMQubator plans to raise an additional EUR200m to EUR250m overseas, including EUR125m in additional seeding capital.
On the award, Tielman says: “We are very honoured that the readers of Hedgeweek have selected us as the best seeding platform only two years after IMQubator was founded. We see it as great recognition for our investors, our team, our set-up and last but not least for the teams we have selected. It encourages us all even more to expand our international reach to both emerging managers as well as innovative investors.”
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