NCHICAGO (HedgeWorld.com)–Making a business of matching up hedge fund managers and seed capital is never easy, but almost a year after its own launch, Hedge Fund Launch LLC is close to making its first deals.
The firm announced that its has registered more than 570 prospective startup hedge fund managers and 106 interested seed investors on its online network. The web site, www.hedgefundlaunch.com, has a proprietary matching engine offering seed capital through a network established by the firm’s founders.
Tom Augenthaler and Steve Dyanko created the web site after forming Hedge Fund Center, another industry web site. A third founding member is Jeff Kuchta, who is the chairman and founder of Hedge Advisors Inc., a boutique investment consulting firm.
The web has increased the new company’s exposure and has broadened the universe of managers included on the platform, Mr. Kuchta said. It also has helped attract seed investors, which include: high-net-worth individuals; small- to medium-sized hedge funds of funds; and larger funds of funds.
“We believed from the beginning that our business model was logical and would garner attention, yet the overwhelming amount of interest that we received since the launch of our business has surpassed our wildest expectations,” said Mr. Kuchta.
The firm currently has contracts pending with four different managers and expects to close its first deal on Feb. 1. In the future officials say they will be happy to close three to four deals per year.
Given the interest, Hedge Fund Launch officials have taken the opportunity to gather statistics on the startup hedge fund market. Of the 570 managers registered on the site, 464 provided the detailed information on their firm and strategy that prospective seed investors seek. About 56% of those managers are searching for US$5 million or less to fund their operations, while 38% are looking for between US$6 million and US$25 million. Only 6% are asking for sums greater than US$25 million.
A good number of managers are willing to provide equity in their firm in exchange for seed capital. According to Hedge Fund Launch: 35% would exchange between 11% and 25% of equity; 25% would surrender between 2% and 50% of equity; 23% of managers are willing to offer between 6% and 10% equity in their firm; 11% are willing to relinquish 5% or less; and only 4% would trade more than 50% equity in exchange for seed capital.
Part of the criteria Hedge Fund Launch requires is information on a manager’s experience. Looking at the managers on the platform, not quite half (49%) have five years or less experience in managing portfolios in a manner similar to their proposed fund. The managers’ experience ranges from day traders and retired doctors to experienced hedge fund mangers, mutual fund managers, and proprietary traders looking to launch fund, according to Mr. Kuchta. Most firms (54%) plan to launch with two to three individuals, while 22% will be one-man shops and another 24% will start with four or more on staff.
Among startups, the most popular strategy is hedged equity (31%), according to Hedge Fund Launch. A total of 15% are planning non-directional arbitrage funds, 13% global macro and managed futures funds, 13% multiple strategies, 2% event-driven funds and another 19% said they would employ other strategies that didn’t fit in those categories.