As one of Europe’s leading seeding platforms, the business objective of Amsterdam-based IMQubator is simple: putting investors in control when investing in hedge funds and delivering to them a multiple income stream by investing in emerging managers. Each manager receives a seed ticket of EUR25million, with IMQubator normally taking a 25 per cent equity stake in the management company.
All funds seeded by IMQubator fall under the umbrella of IMQ Investment Management BV, which acts as investment manager.
Speaking with hedgeweek on strategy selection, CEO Jeroen Tielman (pictured) says that in today’s New Normal market environment the firm is looking more at strategies like volatility arbitrage, exotic arbitrage, discretionary emerging markets macro, behaviour-based and activity-based strategies that have zero or negative correlation with equities. As well as providing seed capital, Tielman says that in 2013 the firm intends to broaden out its remit by searching for young managers; not only start-ups, “but those who have been in business for a couple of years. They’ve built an early track record, maybe have EUR40-50million in assets and are looking to grow. So we are expanding our focus by providing acceleration capital in addition to seeding.”
The intention is to look for specialised strategies that might easily be scalable to “five hundred million euros”, says Tielman, who continues:
“We would like to find something different to what mainstream fund managers are offering. We’ve seen a number of managers with good track records but who are finding it hard to break through the USD100million barrier. In earlier days we turned down these managers but now we want to start including them; that’s been a shift in strategy. We are working on a proposal to our investment committee in March but I can’t give away specific details at this stage.”
Another example of how IMQubator is tweaking its business model is its intention to move away from taking an equity stake in a fund management company when seeding, and instead use a gross revenue share model.
“We noticed that the implementation of equity was sometimes quite complicated and costly, particularly in cases where the management company is regulated and the change of share ownership requires regulatory approval. We have decided to use more flexible GRS on a deferred basis; the GRS only kicks in if and when a manager moves beyond breakeven point because we don’t believe in taking away cash from the manager while they still really need it,” says Tielman, confirming that IMQubator already has one or two deals in the pipeline.
Another key development for the firm is the utilisation of live video technology. Previously, all the managers seeded by IMQubator were required to operate out of Amsterdam for operational compliance purposes. This is now no longer the case.
“By using open high definition video lines, management teams will be able to remain where they are. But we will stick to our principals of closely monitoring and guiding the managers we seed, that won’t change.”
On winning the award Tielman says: “We are very honored that the readers of Hedgeweek have elected us as best seeder for the third year in a row. Their support encourages us even more in our effort to make a difference for institutional hedge fund investors.”