Amsterdam-based hedge fund seeding firm IMQ is ready to embark on a new initiative as its current IMQubator fund begins to reach the end of its seven-year investment lifecycle; the fund will be liquidated in December 2015.
That initiative is something Jeroen Tielman (pictured), CEO and founder of IMQ Investment Management, refers to as a “Hybrid relationship Platform” whose sole purpose will be to provide acceleration capital to small and medium sized hedge managers.
It is being aimed at global asset allocators who are looking to not only increase their exposure to alternative investments but who want closer partnership-type relationships with the underlying managers. This is something that IMQ, with its successful track record in seeding managers, is able to achieve.
This will help institutions overcome the disadvantages they face either by choosing to outsource to FoHFs or developing in-house capabilities by acquiring outside teams, which can lead to remuneration issues and conflicts of interest.
“The plan is to provide acceleration capital to smaller managers, those with track records of two to three years and already have some AuM; less than EUR100m for example,” says Tielman.
With this new platform, IMQ will position itself as the “developer and manager” of a portfolio of hedge fund strategies, in the form of managed accounts, and in doing so providing a strategic partner with the advantages of outsourcing and insourcing whilst eliminating the disadvantages.
“We are currently in the process of looking for a long-term strategic partner with an entrepreneurial spirit,” says Tielman.
“They would be the owner of the platform. Our sweet spot for the platform is 10 to 15 managers. To start off with, the ideal scenario would be to have one strategic partner to allocate EUR1bn across 10 managers, each receiving EUR100m of acceleration capital.
“I think it will be an interesting additive to traditional asset managers to help expand their exposure and involvement into alternatives. The core difference to what we are doing versus a FoHF is that we establish a deeper, more aligned relationship between the investor and the manager. At IMQ we operate as a partner investor and that type of relationship is mutually beneficial.”
Aside from being easier for an investor to align their interests, the attraction of investing in smaller managers is that they represent a large and under explored universe where non-correlated strategies can be found.
“Some are excellent diversifiers. They might have limited capacity of EUR800-900m but such managers would make an excellent addition to long-only portfolios,” says Tielman.
Tielman identifies three potential categories of partner for the platform: large private equity firms, who are starting to expand their role into overall alternative solution providers; large commercial asset managers; and pension fund firms who would like to have a proprietary platform to invest in exciting emerging managers.
Indeed, a Canadian pension fund did something similar when they established a platform more than a year ago to invest in emerging hedge funds, appointing an external adviser to run the platform for them – it is this kind of partnership that IMQ is aiming to establish with its hybrid platform.
On winning the award Tielman comments: “We are very grateful that we have received this award for the 4th year in a row and we deeply appreciate the support of the Hedgeweek readers while we are migrating into the next stage of development of IMQ.”