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July 28, 2003 at 08:00 PM
NEW YORK (HedgeWorld.com)–M.D. Sass Investors Services Inc., a firm that manages a variety of strategies in hedge fund, private equity and traditional formats, is looking for alternative investment managers to seed with its own partners’ and clients’ capital.
The group will identify strategies that have an edge and then find managers who can execute those strategies, said Managing Director Jonathan Hochberg, explaining that demand for non-traditional managers is strong; especially as some pension funds are preparing to make large allocations.
“We seek people with experience and credibility to manage money,” Mr. Hochberg said, speaking at a symposium in New York organized by Strategic Research Institute. “In the next six months, we will raise capital to incubate managers and bring them into our organization.”
Investors want low correlation to traditional markets, he observed. “It is hard for institutions to find managers and to do due diligence on them.”
Moreover, many hedge funds with strong track records, such as those run by Viking, New York, and Citadel, Chicago, are closed to new investors. M.D. Sass is not alone in responding to this situation by seeding managers–others, from Blackstone Group, New York, to Moore Capital Management, New York, have gone this route.
But M.D. Sass has the advantage of long-time experience in starting and bringing up investment companies and an already developed incubator business model. In many of the past ventures, it withdrew its capital and reinvested in other managers after the portfolio companies matured and their value increased.
Encouraging Focus
The firm will start up or purchase small money management businesses in traditional and alternative strategies, including hedge funds. It will provide these with facilities and technology infrastructure and perhaps marketing and risk management services.
