First Avenue Partners has launched the FAP Hedge Fund Opportunities Fund, a hedge fund incubation fund, with initial capital of EUR100m from German insurer Gothaer, the firm’s minority sha
First Avenue Partners has launched the FAP Hedge Fund Opportunities Fund, a hedge fund incubation fund, with initial capital of EUR100m from German insurer Gothaer, the firm’s minority shareholder. First Avenue expects the fund to hard close at EUR750m.
The fund, which aims over time to achieve returns of between 15 and 20 per cent on an annualised basis, is managed by Oliver Bergmann, who was previously with Cap Z Investment Partners, a USD2.25bn incubation fund manager based in New York.
First Avenue says the Hedge Fund Opportunities Fund extends and improves on the standard hedge fund incubation model by not only investing in emerging funds, but also supporting overlooked managers requiring ‘acceleration capital’ as well as stressed managers that have experienced an unusual drawdown without losing their operational integrity.
To attract high-quality managers, the fund will provide investment capital on highly competitive business and financial terms. Resulting revenue shares flow back into the fund in full and are structured so that they ‘sunset’ without any exit fees for the managers. The fund does not seek equity stakes and provides marketing support to scale underlying manager assets.
‘In developing our approach, we have carefully researched the incubation space and have designed our model to leverage the strengths that we have, namely our ability to grow managers through our marketing support,’ says First Avenue founding partner Christian Benigni.
‘Our terms reflect our simple desire to attract the highest-quality managers and avoid the intense adverse selection issues encountered by other incubation funds and reflected in their performance.’
The fund is structured as a Guernsey-domiciled open-ended investment company with monthly subscriptions up to the end of this year and quarterly subscriptions thereafter. It’s investment committee consists of First Avenue executive chairman Jonathan Davie, Bergmann, head of due diligence Bryan Goh and Benigni.
First Avenue Partners, which was established in May 2006, is majority owned by its employees and minority owned by Gothaer, a significant investor in alternative investment products. Sir Martin Jacomb is chairman of the firm’s advisory board.