Deutsche Bank and Financial Risk Management (FRM) have announced a partnership to launch the industry’s first hedge fund seeding managed account platform.
The dbalternatives Discovery platform, based on Deutsche Bank’s established and award winning dbalternatives managed account platform, extends the investor protection afforded by its managed account framework into the hedge fund seeding arena. Developed in 2002, the dbalternatives managed account platform addresses hedge fund investor concerns regarding fraud, transparency, liquidity and independent valuation.
The aim of hedge fund seeding is to identify and invest in the funds of select emerging hedge fund managers and to provide strategic guidance to support their development. In return for committed capital, seeding investors receive fund returns and a share of the manager’s revenue. The latter represents an attractive way to benefit from any growth of the hedge fund manager’s assets under management.
FRM, through its hedge fund seeding division FRM Capital Advisors (FCA), will select and negotiate strategic investments in emerging managers which will be made through managed accounts on the dbalternatives Discovery platform. Deutsche Bank will also raise capital for a seeding fund which will invest in early stage hedge funds selected by FCA, which evaluates over 500 seeding opportunities annually through FRM’s global investment team. Investors can therefore now utilise a high quality managed account platform to invest in a seeding fund or to invest directly into emerging hedge funds.
Deutsche Bank’s Global Head of Fund Derivatives, Stephane Farouze (pictured), says: “dbalternatives Discovery is set to reinvent hedge fund seeding through the introduction of managed accounts, which we believe are crucial when investing in emerging managers. Whatever the pedigree of the manager, it’s in these early stages that close monitoring of risk and style drift are most essential. The dbalternatives Discovery platform will provide this through the tried and tested managed account infrastructure we have been offering to investors for the last 10 years. We are pleased to be partnering with FRM in this important new business.”
FRM’s Chief Executive Officer, Blaine Tomlinson, says: “Structural changes in the hedge fund industry have created a new wave of opportunities in seeding. The institutionalisation of the industry has resulted in talented managers needing strategic capital to reach critical mass. In response, we built a well resourced seeding capability to identify these managers and make strategic investments. Now, we are partnering with a leader in managed account platforms with a substantial client franchise to bring seeding to a new level and a wider group of investors.”