Investcorp-Tages, a global multi-manager investment firm, has published a white paper on hedge fund seeding, which examines in detail the mechanics behind the practice and how it can significantly enhance risk-adjusted returns to investors at portfolio level.
An early-stage investment into a hedge fund offers investors the opportunity to take a stake in the fund itself, thereby allowing them to directly participate in the management and performance fee revenues. The white paper explains how this form of revenue share participation can generate over five times the profit an investor would otherwise have received investing in the same hedge fund and illustrates the enhancement to hedge fund returns under different return and asset raising assumptions. The paper also discusses the differences between seeding and other asset classes which generate returns from the economics of asset management, such as private equity.
