New York Hedge Fund Matchmaker Is 'Overwhelmed'

Investors Offshore, New York

30 January 2003

Hedge Fund Launch, LLC, located in Chicago, Houston and Boston, is a network uniting start-up hedge fund managers with providers of seed capital, using a proprietary and specialized matching engine (see www.hedgefundlaunch.com).

Yesterday the company revealed that, almost a year after its unveiling, it had registered over 600 prospective start-up hedge fund managers and 100 interested seed investors on its network.

“We believed from the beginning that our business model was logical and would garner attention, yet the overwhelming amount of interest that we have received since the launch of our business has surpassed our wildest expectations,” said Jeff Kuchta, a founder and managing member of Hedge Fund Launch, LLC. “We are extremely busy keeping pace with the volume of registrations on our network, examining the investment models and backgrounds of the managers, and evaluating their suitability for a match with investors.”

Of the 570 managers currently registered on the Hedgefundlaunch.com network, 464 provided detailed information to aid in facilitating a match with prospective seed investors. Worth noting is that 56% of managers are searching for $5 million or less to fund their operation, while 38% of applicants are looking for between $6 million and $25 million. Only 6% are aiming for sums greater than $25 million.

Most managers also understand the necessity to relinquish equity in their operation in exchange for seed capital. According to the data collected by Hedgefundlaunch.com, 11% of the managers are willing to relinquish 5% or less of equity; 23% would give up between 6% and 10%; 35% would exchange between 11% and 25%; 25% would surrender between 26% and 50% of equity; while only 4% would trade more than 50% of equity in exchange for seed capital.

In terms of relevant experience, 49% of the start-up hedge fund managers have 5 years or less experience in managing portfolios in a similar manner of that to be utilized for their proposed fund, while 24% have between 6 and 10 years, and 27% have more than 10 years. In addition, 61% of managers purport to have an audited or auditable track record of their past trading experience. “The range of experience of the prospective managers on the Hedgefundlaunch.com network is illuminating as we have registrations from day traders and retired doctors on one end of the spectrum, to experienced hedge fund managers, mutual fund managers, and bulge-bracket proprietary traders looking to launch funds”, explained Kuchta.

Regarding infrastructure of the start-up hedge funds, 22% of managers intend to start as one-man shops, 54% expect to launch with 2 to 3 individuals, while 24% plan to start up with 4 or more individuals.

With respect to hedge fund strategies, 31% of the managers are planning to launch a fund employing a hedged equity approach, 15% non-directional arbitrage, 13% global (which includes managed futures), 13% multiple strategies, 2% event driven, and 19% other strategies that do not readily fit into the other categories.

“Hedge Fund Launch, LLC is often asked how long it takes to close a deal, and how many deals are expected to close, so we are careful to explain to our prospective managers and investors that it can be a lengthy process to get a pure concept-stage hedge fund off of the ground. Considering the proper due diligence, term-sheet and contract negotiation, document preparation, and infrastructure formation, a deal can take anywhere from 3 months to one year or more before the seed capital comes in the door,” explained Kuchta. “With our core staff in place and finishing touches on contract negotiations, we expect to close our first deal during the first quarter of 2003. Considering the process involved, we will be extremely happy to close 3 to 4 deals per year.”

Recommended