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Institutions Open To HF Newbies

Date: Thursday, May 29, 2008
Author: Emii.com

As hedge fund assets under management near USD3 trillion and new hedge funds continue to pop up, institutional investors warm to the idea of investing in new funds and younger managers, specifically spinout teams, reports FINAlternatives citing a new Preqin survey.

The survey of 50 institutional investors showed that 46% would be willing to invest in emerging manager hedge funds, with the number climbing to 56% regarding spinout teams. Meanwhile, only 8% said they would offer seed capital for new vehicles. Regarding experience, 39% of respondents are happy with a track record of two years or less, while 24% said they would not invest in a hedge fund with less than five years of fund management experience. Just 6% of institutions said they have no track record requirement.

Noting the changes in the hedge fund marketplace and the competition to invest in the best performing funds, Preqin Hedge’s Amy Bensted said: “With the institutional market maturing, many investors are now using their knowledge and resources to invest in younger, less well established managers  to gain access to the next generation of star managers.”

On the other end, 40% of institutional investors said they would commit to funds that had between USD100 - USD500 million in total assets, while 17% have no AUM requirements and 11% would only commit to a fund if it had a minimum of USD1 billion