Canada gets first hedge fund incubator |
Date: Wednesday, February 6, 2008
Author: Andrew Willis, The Globe and Mail.com
There’s a chicken-and-egg dilemma that comes with trying to set up a hedge fund.
Most institutions need to see a track record before they give a manager any capital. Even if the individual in question shot the lights out running money for a pension fund, or an insurer, or a dealer, institutions want to see two years of solo results before they will write a cheque.
Obviously, the potential hedge fund manager has no track record.
So, many hedge funds start small, with cash from family and friends, which poses its own set of investing challenges. Or they don’t get started at all.
Two established funds want to help Canada’s next generation of hedge fund managers get cracking, or cooking, without a track record. Arrow Hedge Partners and Marret Asset Management launched a $150-million hedge fund incubator Tuesday that’s the first of its kind in this country.
Accelerator Capital Fund, as the incubator is called, will put anywhere from $5-million to $25-million into early stage hedge funds, managed by seasoned but undiscovered Canadian managers. The capital comes from a number of institutions, including one of the major banks, a pension fund and a high net worth asset manager.
This incubator is the brain child of individuals who know what it’s like to try and raise money for an unproven money manager.
Accelerator will be run by Peter Rizakos, who has more than 20 years' experience as a securities lawyer and a fund executive. He helped build Altamira, then went on to found preferred share fund Chaterhouse PSI Management, which was sold to Jovian Capital in 2006.
Arrow is a $1-billion fund-of-hedge-funds company launched by Jim McGovern, who previously built BPI Financial, a mutual fund manager sold back in 2000 for $206-million.
And Marret is a $1.6-billion fixed income-focused fund founded six years ago by Barry Allan, another Altamira veteran. “The incubator concept has proven itself in the U.S. and overseas,” said Mr. McGovern. “We’re hoping to capitalize on the inefficiencies that exist in this market, where promising fund managers need early backers.”
Accelerator is “agnostic” on the investment style of the fund managers it backs, Mr. McGovern said. In addition to cash, the incubator team can provide back office, technology and legal support as needed. The fund is quite willing to back locals investing outside Canada, which will make it attractive to expat money managers.
Taking a lesson from successful U.S. and European incubators, Accelerator will not own equity in the hedge funds it backs. It will earn returns by taking a portion of revenues over a set period, with the hedge fund principals eventually taking full control.
Even with Accelerator on the scene, launching a hedge fund in Canada is a tough proposition. There’s not a whole lot of capital chasing every money-making concept, and scale does matter. But most fund managers do dream of striking out on their own, and it just got a whole lot easier to make that dream come true.
Arrow Hedge Partners and Marret Asset Management Launch Hedge Fund Incubator Fund.
$ 150 Million raised from Canadian Institutional and High Net Worth
Investors to seed Canadian investment managers.
TORONTO, Feb. 5 /CNW/ - Arrow Hedge Partners Inc. and Marret Asset
Management Inc. announced today that they have launched a hedge fund incubator
fund, Accelerator Capital Fund Inc. Accelerator will invest its capital in
early stage hedge funds, managed by seasoned, but largely undiscovered
Canadian investment managers. Accelerator will seek out early stage hedge
funds that utilize a variety of alternative investment strategies, including
long/short equity, relative value, event driven and global macro. Accelerator
has secured commitments for approximately $150 million from institutional
investors, including a major Canadian bank, a pension fund and a wealth
management firm on behalf of some of its individual high net worth investors.
Barry Allan, President and Chief Executive Officer (CEO), of Marret,
stated that "both Arrow and Marret have extensive experience in identifying
top hedge fund managers and in seeding and managing early stage hedge funds.
We realize that the initial capital is often the most difficult to obtain.
Accelerator will provide this and more, including operational and risk
management support and capital raising assistance. We're pleased to put our
collective experience and resources to work for Accelerator."
"We are very excited about Accelerator," said Jim McGovern, Managing
Director and CEO, of Arrow. "It's the first fund of its kind in Canada and we
believe that the fund will give investors unparalleled access to the next
generation of top flight Canadian investment managers. We anticipate seeding
up to 10 managers."
Peter Rizakos has been appointed President of Accelerator Capital
Management Inc., the manager of the fund, and will oversee the fund's
investment and operational activities. He has over 20 years experience in the
financial services industry as a securities lawyer and a senior executive in
the investment fund industry.
About Arrow Hedge Partners Inc.
Arrow Hedge Partners Inc. is an investment management company that
specializes in providing access to high-quality hedge fund managers and
multi-manager funds of funds to a wide range of clients, including family
offices, institutions, pension funds and high net-worth individuals. Arrow is
a member of AIMA (Alternative Investment Management Association) and is a
substantial co-investor in its own funds. Arrow Hedge Partners Inc. is
headquartered in Toronto, Canada, with sales offices in Vancouver, Calgary,
Montreal and Geneva. Arrow currently manages over CDN$1 billion on behalf of
high net-worth and institutional investors globally.
About Marret Asset Management Inc.
Marret was founded by Barry Allan in 2000. Marret is a specialty
credit-oriented fixed income manager based in Toronto. It manages over $1.6
billion on behalf of high net worth, retail and institutional investors,
including over $450 million in high yield hedge funds.
For further information: Peter Rizakos, President, Accelerator Capital Management Inc., prizakos@acceleratorcap.com, (416) 847-3987