Institutional Investor's Alpha Magazine - November 2008 - (Page 41)

port Capital in San Francisco, was seeded with about $50 million in 2003 and now manages $4.3 billion. As with most successful seeds, Passport bought out Capital Z’s equity stake in January 2006, though Cap Z remains an investor in the fund. Lamle’s ﬁrm, M.D. Sass, has nine seeded managers in a $273 million fund raised in 2006 with Australia’s Macquarie Bank. “Our business model is to be real working partners in the business,” he says. “We provide the entire infrastructure: tax, legal, portfolio accounting, risk management. We have rights in our agreement to intervene if the portfolio is out of alignment.” His team sees every transaction in real time, has seats on seed managers’ boards and even provides ofﬁce space to managers who need it. Lamle doesn’t believe in giving huge chunks of capital to untried teams. “What kind of risk manager would I be to take an unproven team in a difﬁcult market environment and give them $100 million?” he asks. O ther seeders seem quite willing to risk $100 million, however. Investcorp adopted its model after Acito helped the company set up its seeding platform in 2004, while he was still a partner at consulting firm Casey, Quirk & Acito. As a consultant, Acito examined both business models. Giving out $15 million to $25 million and taking a quarter or more equity stake was not providing much hands-on support to a manager, he reasoned. “One hundred million dollars is a magical threshold — that point when other investors and funds of funds will give managers money,” says Capital Z chief executive Christy Wood, whose firm gives new managers their ﬁrst $50 million or still-emerging managers their second $50 million. With many investment bank seeding platforms shut down or disabled, much of the seeder ﬁrms’ traditional competition is gone. Now their main rivals are several dozen large multistrategy firms, including FrontPoint Partners in Greenwich, Connecticut; Millennium Partners in New York; SAC Capital Advisors in Stamford, Connecticut; and Brevan Howard in London, as well as Perella Weinberg Partners’ Austin, Texas–based hedge fund program. These ﬁrms offer managers a platform to run their investment operation separately from — but still within — the parent company. Pure seeder ﬁrms say that true entrepreneurs, however, won’t be satisﬁed with passing out a parent company’s business cards. Those independent spirits are a seed ﬁrm’s sweet spot. Patric de Gentile-Williams, chief operating ofﬁcer of London-based seeder ﬁrm FRM Capital Advisors, sees a harsh evolutionary weeding-out under way. “The set of http://www.itg.com http://www.itg.com

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - November 2008

Institutional Investor's Alpha Magazine - November 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Risk Rewarded The Good Guys: In the Here and Now Interview: Minister of Finance Cover Story: The Agony of Dan Zwirn Strategies: The Early Birds Are Awake Strategies: The Call of Shari’a Profile: Sweet Home Chicago Research Center: What Stampede? Alpha Bytes: Centralize the Data Unhedged: Commentary: Learning from the Wreckage

Institutional Investor's Alpha Magazine - November 2008

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