Hedge Fund Seed Deals

First post on WSO, used to be a reader a long time ago. Great site, thanks.

I'd like to start a dialogue with anyone here willing to help me who knows about hedge fund seed deals.

Specific questions:

- Average terms (%, lockup, AUM at launch, etc.)
- Exclusivity options (how much are these worth?)
- Major considerations over time with the seed (standard buyout clauses, etc.)
- Marketing and back office support?
- Other similar questions

I've read everything I can find on Google, which is not much.

My situation:

I recently left "very prestigious hedge fund" and have been approached by a number of seed funds. I won't name names, but these are some of the best seed funds in the business so you can probably guess who they are. I run a unique equity long/short strategy, and there are only two other funds in the country running this strategy, neither of which is accepting capital. Returns have been stellar with low risk. I'm trying to assess which (if any) of these firms I should go with and why. The round number on the table seems to be $50 million at launch.

In the immediate-term, one fund is asking me to sign an exclusivity agreement. Does anyone know how much I should ask for in return? I don't want to give a free option away, I should get something for it. How much compensation is standard for a 3-month standstill while these guys structure a deal (assuming they can get it done)? I was thinking $20K a month would be reasonable but I have no idea how these usually look.

If anyone has answers, I would appreciate a response here or via PM if you can't disclose specifics in a public venue.

 

Why aren't you trying to directly recruit funding if you come from a "very prestigious hedge fund" and have a miraculously successful and unique L/S strategy, which also implies you have a track record?

Honestly curious.

 

Because it's undesirable to directly recruit funding one check at a time when instead you can get a $50 million check up front with a 3 year lockup, outsource all the marketing and back office work, and focus exclusively on investing. Most institutional investors are clinically retarded and want to see monthly numbers for over 5 years. Most wealthy private investors are a lot less strict in their requirements but also write smaller checks, so I would likely need to get at least 20 checks to hit this level -- difficult since I have a small network of really wealthy contacts. I hate fundraising and would rather give up part of the GP then have to deal with it.

Also, this is a different issue, but most people don't understand the strategy even if I explain it to them. It has a track record going back over 30 years and my fund will be the third generation iteration of the strategy. Both prior iterations are in the top 1% of hedge fund returns. My track record at the firm I worked at was in the top 1% but only over a two year period where I had direct responsibility for a book. It's a lot different than the standard "We have a concentrated book of mediocre positions based on next quarter's earnings" long / short strategy that most funds pursue so the institutional community struggles with it even though the numbers are good.

Honestly, most hedge funds are just getting into crowded trades they heard about at a conference or that came up on the same stock screens everyone else looks at. The herding behavior on the short side is particularly bad. This is one reason most hedge funds don't do all that well, but it's also what most institutional investors want to see, ironically. You know you are off to a bad start in a FoF meeting when their first and only substantive question is what is the P/E multiple of your favorite long idea. This question is totally backwards and deserves an answer like this:

"I am generic hedge fund, and my stated strategy is to buy the lowest valuation stocks, of the best businesses, with the highest quality management teams."

I ALSO WANT TO BUY THOSE STOCKS, PLEASE HAVE THE SELLERS CONTACT ME IMMEDIATELY, K THX

So dumb. True story but most people in this business, including some people who have been around for a long time, have very little feel for what would or wouldn't work in the market. I'm talking about billion dollar funds that would rather invest in a 12% CAGR long tenured value trap investment strategy that barely works than a credible 30%+ two year track record strategy that is unique and makes sense.

The institutions that get it are much more interested in a seed deal with first right of refusal on additional capital raises than in just cutting a $20 million starter check. Whether I would accept the seed depends on the terms, but for 20% of the GP with a reasonable buyback clause I think I would.

 

I'm not in the HF business but one of my friends, who I happen to be grabbing a drink with tonight, was a PM at one of the top shops where he ran a pretty sizeable chunk himself, hit it out of the park, etc. He basically retired a year or two ago at 37/38 (he really hit it out of the park) but was approached last fall by one of the big seeders and gave it some thought but the economics weren't too appealing to him. I forget the exact terms, and I'll ask him, but I want to say it was more than $50MM (closer to $200MM but I could be remembering incorrectly), out of the 2 it was 50 bps so not that much to keep the lights on and something like 20-30% of the incentive. For him it wasn't enough to get back into the business because he made a boat load before and he figured with the stress and hours, the possibility of a few million per year wasn't worth it (not a bad problem to have...). I'll ask him tonight what they were proposing.

It may be worth it. Fund raising is a bitch and instead of starting with friends and family for a few million, landing $50MM upfront even with lower numbers to you could well be worth it.

Regarding the exclusivity, and like I said I've never done this specifically before but I've done a lot of deals, but can't they write up a term sheet/LOI/MOU where you can agree to the general business terms before you lock up for three months and leave the lawyers to do their work? Three months in the beginning of August (because it probably wouldn't be executed until September) basically leads you into next year if the deal doesn't go through.

 

The standard a few years ago was something like 25-30% of top line. However, as fund of funds have struggled to justify their existence, more of them are getting into seeding in their traditional fund of funds structure and their economics in your firm generally have a specific end date. So, if you have any contacts in that space, I would shoot for those first, because they can write big checks and will have better terms than traditional seeders. However, you won't get marketing support. But, you might be able to afford a good marketer and their junior guy(s) if you give them a little of the GP and a nominal salary and still come out ahead vs. a traditional seeder because of the extra initial capital they give you.

Good luck.

 
DickFuld:

The standard a few years ago was something like 25-30% of top line. However, as fund of funds have struggled to justify their existence, more of them are getting into seeding in their traditional fund of funds structure and their economics in your firm generally have a specific end date. So, if you have any contacts in that space, I would shoot for those first, because they can write big checks and will have better terms than traditional seeders. However, you won't get marketing support. But, you might be able to afford a good marketer and their junior guy(s) if you give them a little of the GP and a nominal salary and still come out ahead vs. a traditional seeder because of the extra initial capital they give you.

Good luck.

Thank you, this is good advice.

 
heretic:

First post on WSO, used to be a reader a long time ago. Great site, thanks.

I'd like to start a dialogue with anyone here willing to help me who knows about hedge fund seed deals.

Specific questions:

- Average terms (%, lockup, AUM at launch, etc.)
- Exclusivity options (how much are these worth?)
- Major considerations over time with the seed (standard buyout clauses, etc.)
- Marketing and back office support?
- Other similar questions

I've read everything I can find on Google, which is not much.

My situation:

I recently left "very prestigious hedge fund" and have been approached by a number of seed funds. I won't name names, but these are some of the best seed funds in the business so you can probably guess who they are. I run a unique equity long/short strategy, and there are only two other funds in the country running this strategy, neither of which is accepting capital. Returns have been stellar with low risk. I'm trying to assess which (if any) of these firms I should go with and why. The round number on the table seems to be $50 million at launch.

In the immediate-term, one fund is asking me to sign an exclusivity agreement. Does anyone know how much I should ask for in return? I don't want to give a free option away, I should get something for it. How much compensation is standard for a 3-month standstill while these guys structure a deal (assuming they can get it done)? I was thinking $20K a month would be reasonable but I have no idea how these usually look.

If anyone has answers, I would appreciate a response here or via PM if you can't disclose specifics in a public venue.

I think 25% of the total fees, 3 years of back office support at which point you can retain the same services but start paying a fee, and a 3 year lock up on the capital is kind of standard. The real catch is that even if the seed capital is redeemed after three years, they still retain a 25% ownership stake in the GP. I also think that marketing support is rare and even if it is promised seems specious.

Were you a PM at a multi-manager fund or somewhat senior at a traditional fund? I only ask because if you had a seat at a SAC/Millenium/etc does leaving your book make sense given the upside of potentially having your own fund? If you came from a single manager fund would your boss consider making the investment? Most founders of "extremely prestigious hedge funds" are billionaires. Its not uncommon for them to invest with former employees who leave on good terms.

It seems like preferred initial LP investments fee at reduced fees (ie 1/15 instead of 2/20) and there is the 25% that the seeder gets. Maybe you don't have to do MFNs if you have a seed (they are THE MFN i guess?). Raising assets, hiring staff, leasing space, etc seems like a real headache.

 

I have talked to one of the two you mentioned Gray Fox, thanks for the advice. I've never been through the process before but it does seem to make a difference if you are backed by a big name. I know Mangrove benefited from Greenlight's involvement (not sure if that was a seed or regular investment) and probably others as well (how is Hirzel doing these days?). I haven't followed Greenlight's investments in detail. Tiger speaks for itself obviously.

I was hoping to get away with 20% instead of 25% and I agree the marketing support seems hard to define (what does "support" really mean?). It was not a big fund and is not a household name compared to SAC, etc., but it has knock the lights out returns. It's well connected at the top of the Street though, I guarantee Greenlight / Tiger know who it is -- the one I met with took the meeting immediately and wrote back within 2 minutes over email. I am talking with the founder, we'll see how that goes. It's possible he would seed me or provide a large upfront investment.

In terms of staff and the operational aspects, I went through it once before building an international office and it took about six months of headache but ultimately was doable.

Any thoughts on a standstill agreement and how much that would be worth?

Thanks again.

 

I smell BS. Unique L/S and someone who is getting seeded at 50mm comes to WSO for advice? Google? Give me a fucking break.

Start with your "prestigious" fund and ask around. If it's truly as good as you say, you aren't the 1st and won't be the last. This has BS written all over it.

I've truly seen it all...

 

There's nothing of substance about terms or lockup agreements on Google. Try it.

To be honest though, I don't really care. I didn't work for SAC or another huge mega fund. It is a small fund with incredible returns. It's not the same exposure to the traditional hedge fund circuit. Believe whatever you want, it was a sincere question.

 

Sincere question to WSO instead of your peers and super mentor at your fund? Google? You don't see the problem with your own logic?

1st, unique L/S, I have a bridge for sale too.
2nd, you're considering leaving your current book for 50mm so your self proclamation of killing seems a bit off. Lastly and the root, doesn't matter how far separated you are from the main "circuit" line, you should be able to find many people who have been through the seeding process.

Sounds like you're posing a hypothetical ? BC nothing in your "story" adds up at all.

 

Maybe I am too generic an investor myself, but I am extremely skeptical anytime someone claims they have a "unique" strategy in this business. Maybe the reason you're having trouble raising funds has something to do with your attitude towards allocators? I agree many are idiots, but it sounds like you've dismissed the whole lot a bit too hastily and arrogantly.

Assuming you are a research-oriented l/s investor, there are only so many ways you can differentiate yourself. People emphasize different types of situations and parts of the research process, weight valuation differently, use various analytical techniques and tools, trade more or less often, have varying philosophies around leverage, liquidity, and exposure levels, restrict their investable universe, and approach risk management and position sizing uniquely even, but at the end of the day the processes are geared toward the same outcome: buying securities you believe to be undervalued and selling securities you believe are overvalued. The ability to do so consistently over time is a rare and valuable skill, to be sure, but it is not magic.

 
tempaccount:

Maybe I am too generic an investor myself, but I am extremely skeptical anytime someone claims they have a "unique" strategy in this business. Maybe the reason you're having trouble raising funds has something to do with your attitude towards allocators? I agree many are idiots, but it sounds like you've dismissed the whole lot a bit too hastily and arrogantly.

Assuming you are a research-oriented l/s investor, there are only so many ways you can differentiate yourself. People emphasize different types of situations and parts of the research process, weight valuation differently, use various analytical techniques and tools, trade more or less often, have varying philosophies around leverage, liquidity, and exposure levels, restrict their investable universe, and approach risk management and position sizing uniquely even, but at the end of the day the processes are geared toward the same outcome: buying securities you believe to be undervalued and selling securities you believe are overvalued. The ability to do so consistently over time is a rare and valuable skill, to be sure, but it is not magic.

Everyone is getting hung up about the unique strategy. Here are a couple of data points. You can believe me or not, but these are the facts:

1) I ran a statistical study of all 13F filers going back over a decade looking for funds with similar portfolio construction and returns. There were only three results. One was the fund I used to work at. A second one was the first generation predecessor fund. To my surprise there was also a third fund I had never heard of. So that is three funds out of thousands. This is objective data. I researched the third fund to the extent they have publicly available information and there is a meaningful amount of overlap in the strategy from what I could tell.

2) Met with a large multi-family office (one of the seed candidates) that specifically targets emerging managers. Their CIO meets with over 500 funds a year and has been doing this for a long time. I gave him the demo. His words were "I have never seen anything like this before." They've done 5 seed deals and are quite selective, I think they know what they are doing.

Who said I am having trouble raising funds? I sat through some meetings at prior jobs and wouldn't take money from most FoFs anyway. The seed funds have approached me. Two were through a 3rd party marketer friend I know. The other two were cold calls.

 

Can't comment on your specific requirements as I don't have that exposure but could not resist on the whole unique strategy.

I've worked for a LS equity fund running a significant amount. The beginning was amazing as I was learning so much and then I realised there are so many others who do something quite similar. At times I felt what we did was way too common and we needed to do something 'unique'. Fact is, having spent a year there, I TRUST what we did and if I had that size of money to manage I'd follow a pretty similar approach.

Most investors are quite concerned when people talk about unique strategies, even if they are tested with a solid track record.

However, if you are looking for a limited size book with sticky investors, then given what you've said so far, it should be okay.

Few things you might want to consider, from my own experience:

  1. Investors are a pain in your arse but a necessary evil. Even the established ones. Football investors are clueless, expect way too much from you and waste your time. My boss could be picky about investors because things were going good overall.
  2. PM's at a place like yours get bugged by investors big time - they will ask you to fill out surveys (and they are extremely annoying and long as well), sit through conference calls and the rest of it. AND they will expect you to perform. Even with the 'support' you get, most people are unable to respond to specific investor requests - the PM's or partners in investing roles are usually best at responding as they are in the markets.
  3. Surprisingly most investors won't understand simple technical stuff so you have a better chance of maintaining a relationship if you make it all easy for them to understand - this could be your emails, data, presentations....just spoon feed and dumb it down. But then they get used to it and expect babysitting. Consistency helps as well. Start ups present data in one format and then an improved version but this confuses the other party. They receive inputs from many other funds so have to consider that as well.
  4. Awkward factor: continuing on from point 3, many investors don't invest with PM's whose lingo they don't understand. Say, you have this unique strategy which is going well - an investor asks you for clarification and quite often fails to understand the Greek you're speaking, they will rather REDEEM.
  5. Investors point of view: Let's say you get 50m from your seed investor. What next? You'd want more money even to keep the lights on. I can assure you hundreds of investors will meet with you, some will even travel from far. But when it comes to investing people hit a dead end and I've seen this happen with PM's with so called unique strategy and a good track record and the rest of it. Investors think, if they put say 10m in your 50m fund so that's 60m in total, then they constitute for c. 17% of your total portfolio and that's way too much for them. Might not make sense but that's how they think. Being 5% of your portfolio is more reasonable for them but then often it's too small for them to invest. ALWAYS THINK from investors point of view, it will make a difference.
  6. Costs, costs and costs. New funds struggle big time with expenses. You've had experience in setting up an international office so will prove to be relevant I'm sure but something to consider very seriously.

Good luck and hope you find smart investors who will allow you to do your job and grow at the same time.

 

Investors have a hard time with 2 year track records. That's not much of a history and statistically very insignificant. Yes, the strategy has been around for a while, so you say, but not with you in charge.

 

The quote function doesn't seem to work that well with some posts. Thanks GCredit for the thoughtful response.

I've worked for a LS equity fund running a significant amount. The beginning was amazing as I was learning so much and then I realised there are so many others who do something quite similar. At times I felt what we did was way too common and we needed to do something 'unique'. Fact is, having spent a year there, I TRUST what we did and if I had that size of money to manage I'd follow a pretty similar approach.

^ Most funds that I am aware of, including some pretty successful funds with >$1B AUM hedge funds are basically running n=30 portfolios focusing on investments 1-2 quarters away from anticipated monetization (trading more so than investing really) and sourcing their ideas off of SumZero and VIC. This results in crowded, subpar trades for the most part. The majority of investors really have no unique, repeatable sourcing edge.

This is not to bag on other investors as most funds running that type of strategy are doing so because that's what investors demand and they have to behave a certain way to stay in business. But it's very sub-optimal and unoriginal. This probably accounts for over 90% of L/S funds.

In my view, research is basically a commodity -- we all talk to the same people, ask the same question, build the same models. The edge is in knowing where to look, and when, and being extremely focused and disciplined. There is essentially never a good reason to spend weeks or a months researching one idea. Most of the Street wastes volumes of time.

  1. Surprisingly most investors won't understand simple technical stuff so you have a better chance of maintaining a relationship if you make it all easy for them to understand - this could be your emails, data, presentations....just spoon feed and dumb it down. But then they get used to it and expect babysitting. Consistency helps as well. Start ups present data in one format and then an improved version but this confuses the other party. They receive inputs from many other funds so have to consider that as well.

^ I agree, I find this extremely frustrating.

  1. Investors point of view: Let's say you get 50m from your seed investor. What next? You'd want more money even to keep the lights on. I can assure you hundreds of investors will meet with you, some will even travel from far. But when it comes to investing people hit a dead end and I've seen this happen with PM's with so called unique strategy and a good track record and the rest of it. Investors think, if they put say 10m in your 50m fund so that's 60m in total, then they constitute for c. 17% of your total portfolio and that's way too much for them. Might not make sense but that's how they think. Being 5% of your portfolio is more reasonable for them but then often it's too small for them to invest. ALWAYS THINK from investors point of view, it will make a difference.

^ The budget works very well at $50. I wouldn't hire pricey Harvard MBAs, etc. All in compensation costs for the entire team would be ~$350K a year. The data licenses I need cost about $7K5 a year. Legal costs after setup are minimal. Administrator costs are not that bad. I would rent a small office and relocate to a low COL city. I would almost certainly make over a million a year and likely several million on a good year. That's a pretty good start IMO.

If there is a 3 year lockup, I don't care about meeting investors. It's a waste of time. If the returns are good, the worst case scenario is the $50 grows organically. If the numbers suck, I don't deserve to be in business anyway.

I agree though that there are tiers of investors. There are few investors willing to invest anything under $50. Between $50 and $100 it opens up a bit. Over $100 it opens a lot. Over $300 it's wide open. Better to give up 20-25% of the GP and start on the map than try to cobble it together one check at a time given that >95% of investors won't touch funds that small.

 
heretic:
I ran a statistical study of all 13F filers going back over a decade looking for funds with similar portfolio construction and returns. There were only three results. One was the fund I used to work at. A second one was the first generation predecessor fund. To my surprise there was also a third fund I had never heard of. So that is three funds out of thousands. This is objective data. I researched the third fund to the extent they have publicly available information and there is a meaningful amount of overlap in the strategy from what I could tell.

LOL. You can't extrapolate much at all about a long/short strategy from holdings disclosures, which don't even include shorts, many derivatives, non-US listed positions, and of course funds like your own proposed seed deal(!) that are either sub-$100m or part of a larger filer. So you have some under-owned longs or an unusual options strategy. Good for you. It's a nice marketing angle, but if your approach to interpreting 13-F filings extends to the rest of your investment process, then your uniqueness might not be something you want to advertise.

 

Man, I'm super curious as to what your strategy is (obviously I know you're not sharing for self explanatory reasons). I agree with you, a lot of L/S strategies are the same (it's what I do, and I do like it), and sadly I've never heard of a different way of investing. Good luck, I'm sure you'll be crushing it with your own fund pretty soon...

 

Yeah okay, the shorts aren't in there and there is window dressing around the end of every quarter probably. So? I already knew what two of the funds were doing and have internal documents and processes for both funds. It's not a mystery. There were no other funds that were even close with similar metrics.

You guys are right though. You watch CNBC and read the WSJ so of course you must know every possible strategy out there and the only really viable hedge funds are of course SAC and ESL and a few others (which you've heard of!) so really there couldn't possibly be any other way or you would already be doing it.

Yawn...

 

Thank you Gray Fox. I was going off the MS new fund budget PDF that is floating around. It has estimated costs for a $150mm AUM fund. The numbers are high but it provides some good context with line-by-line items for various categories and what could be counted as fund vs management company expense. PM me if you want it and I will send it to you.

In terms of the small fund dynamic, I know a few people that run $10mm books that can make decent money work for themselves, in the range of $250-500K a year. That's not great by NYC standards but if you live in a lower cost of living city it's a good living to do your own thing. The problem is those funds have a hard time scaling because they are one man shops with no infrastructure, so they can never get big checks and it's a grind to get anywhere approaching a normal sustainable fund size.

Everyone thinks they will be the next Kerrisdale but it's hard to scale that rapidly without a +100% short China fraud-driven year. At best it's more likely that a new launch would be more like Osmium, which ramped over a decade from $200K to $100mm. Even that is probably pretty rare. I'd rather give up part of the GP if possible.

 

Thanks to all who were helpful, I appreciate that. Haters gonna hate. No one here knows the answer to my original questions so that's enough for me in this thread. PM me if you have something constructive to discuss. I will update as the process continues.

 

i'm going thru a similar situation...not having a long track record and trying to raise capital. My strategy is very different (semi-high frequency highly leveraged trading US Treasuries) but most of the items you mentioned regarding raising capital hit home for me.

One thing i didn't see you mention are the 1st loss capital allocators (Topwater in CT is one). They will give you 10x whatever money you have (yours + whatever investors you already have). In exchange for the 10x leverage, they get 50% of your P&L...but you take any losses from the initial capital 100%. So essentially, the capital allocator's money is theoretically never at risk (unless you lose more than 10% of the total (so, all your $$) in one day) even tho you are now trading leveraged.

You are still free to raise $$ from investors..but in this model, each check you get from an investor becomes 10x. Of course, this then puts you more into my territory of trading highly leveraged..and that may not be comfortable for your strategy.

So the economics...lets say you have 1mm...Topwater gives you 10mm (i think they max out in the 50-100mm range).

On 11mm, lets say you make 30% 3.3mm Topwater keeps 1.65mm, and so do you

vs on your 1mm if you stayed on your own...if you made the same 30%...you keep only 300k...so 4.5x more...but to get that, you had to perform leveraged.

The benefit (besides the leverage which can be debated as either a benefit or a curse) is that you get to create a track record trading the entire amount...and you can return the Topwater capital when you raise sufficient outside investor funds. So to trade a 50mm fund, you only need to raise 5mm of investor capital.

Depending on your strategies volatility, this could be attractive, or the kiss of death.

I am a proprietary Govt Bond Trader...i post my comments on the mkt intraday at twitter...and longer articles on my blog. I've accumulated a lot of educational info in these blogs..so i highly recommend checking them out http://govttrader.blogspot.com
 
Best Response

I got the deal and passed on it. I just didn't want to give up 20% of the business. It also came down to fit and I didn't want to work with the specific people involved even though it was from a top seed fund with good people. On a personal level there was no fit. I basically just wanted a big check with no strings attached and no GP, and I ended up getting that from someone else.

It took about 6 months start to end (December was pretty much a busted month due to the holidays). I don't know if that's fast or slow. It felt slow.

A few people PM'd me and asked me terms so I will put that here for anyone reading. I don't claim this is comprehensive but this is what I saw -- I ended up having serious discussions with 5 groups so I got a range of bids even if the process of these didn't go all the way:

Market right now is 20-25% of the GP for a $20-50 ticket with a 2-3 year lock and lots of other clauses that benefit the seeder (typically it's pretty one-sided) and likely close to full fees (which works out to 2/16 with a 20% GP discount -- they usually don't rape you on the management fee but it depends on the deal). I had discussions with one group that wanted "20 for 20" (this is a terrible deal) and another that offered to come in for $50 with no GP as a regular LP (I had two such offers and chose one). Overall I had two seed offers, two LP offers, and one internal prop desk offer which was kind of a hybrid. For seed only, a middle of the road deal would be $40-50 for 20%. Straight LP deals are rare for emerging managers or at least that was my takeaway. This information is on the internet but there doesn't seem to be a big consensus about what market terms are and it's opaque. This was just my personal experience, but checking around with a few other people, I think 20-25% and roughly $40 is market for a seed.

Besides not wanting to share, I passed because a lot of non-seed LPs don't like seed models and I thought it might hurt my ability to scale the business. It's a trade off, because you get a big brand name behind you as the group taking the biggest risk as the first investor (people like this) but the seed deals are often structured so the big first investor gets such advantageous terms and creates incentives to disadvantage the other investors (people hate this). The seeder will often pressure the fund to get big quickly and may encourage the fund to blow through its capacity limit by raising more assets and/or take on additional capital when it's not suitable. This is heavily dependent on the strategy: if you run a macro fund with $10B of capacity then who cares.

I tried to find the total number of seed deals granted per year across the top 10 or so firms and could not find a number but it's low. Many of the top firms might do 2-4 deals a year, so we're looking at a pretty small number of total tickets. The really big tickets only come out of a few firms and there aren't more than a few >$100 tickets per year from what I can tell. The only really big tickets I've read about went to really well established PMs from top shops. Most people at that level don't even need seed deals though so the seed model is really designed for strong emerging managers who aren't quite at the super elite level among emerging managers.

You're still probably at least in the top 10% of your cohort to be really considered though and better than that to get a straight LP deal of size. One group I spoke with meets 500 emerging or recently established managers a year and invests in about 5. Those are bad odds but in the ballpark as well for other funds. This is like the pro sports draft.

Age is not a huge factor in the seed model. I've seen people as young as 25 get funded and as old as 40. I'm on the younger side but that didn't even come up once during the process.

Who gets a ticket is heavily reliant on the specific strategy and pedigree involved. They want something different. I'm not going to elaborate on my strategy but it's different and that was the key variable for me. It helps to pitch to people who know the strategy already, obviously. I had a wide range of meetings from people who couldn't understand what I was talking about, to someone who offered me $50 million on the spot within 45 minutes give their familiarity with the approach. This latter group has been familiar with the strategy for a long time, so I wouldn't expect that and frankly it shocked me.

You also should plan on at least 2-3 months of diligence they will conduct on you, the strategy, prior employment, etc. You better be squeaky clean in all regards. The more numbers you can give them, the better. At this point, where you went to school, etc. is not as important as it is when you first start in the business. Where you worked and what you do there is extremely important. Are you credible enough to run the strategy you propose? Do you have experience building a team? Do you know how to structure the book properly? Have you worked with service providers before? How do you manage risk? Is your process repeatable and scaleable? You should be able answer all of these in excruciating detail and provide specific, tangible examples.

If this is a trolling effort, it's the worst trolling on WSO. I have not posted in any other threads or acted like a troll beyond that some of you don't believe me and I think most investors are idiots as I posted above. That's fine, I don't care. I'm not following up after this, I just wanted to post an update for the people who supported me and share some info that I hope helps future readers.

 

Odit aliquid dolore itaque facilis. Voluptatibus magni molestiae nobis tempora. Excepturi nostrum ad consequatur earum reiciendis repellendus ut.

 

Dolor praesentium tenetur perferendis veritatis est amet iste. Excepturi eius incidunt molestiae voluptate quos.

Eveniet veritatis unde vero numquam et enim. Quo molestias voluptatem impedit voluptate ipsa qui id et.

Harum libero labore voluptatem. Est eveniet aut nulla nostrum voluptas quae. Illum sed sequi in magnam qui libero.

Vel consectetur enim iure vitae sit soluta. Totam quidem quo libero similique. Provident unde officiis et labore necessitatibus rem non aut. Quam laborum nobis non repellendus. Voluptatum asperiores dolorum ullam dolor consequatur quaerat incidunt libero. Ut delectus delectus magnam facere nemo est.

Career Advancement Opportunities

March 2024 Hedge Fund

  • Point72 98.9%
  • D.E. Shaw 97.9%
  • Magnetar Capital 96.8%
  • Citadel Investment Group 95.8%
  • AQR Capital Management 94.7%

Overall Employee Satisfaction

March 2024 Hedge Fund

  • Magnetar Capital 98.9%
  • D.E. Shaw 97.8%
  • Blackstone Group 96.8%
  • Two Sigma Investments 95.7%
  • Citadel Investment Group 94.6%

Professional Growth Opportunities

March 2024 Hedge Fund

  • AQR Capital Management 99.0%
  • Point72 97.9%
  • D.E. Shaw 96.9%
  • Citadel Investment Group 95.8%
  • Magnetar Capital 94.8%

Total Avg Compensation

March 2024 Hedge Fund

  • Portfolio Manager (9) $1,648
  • Vice President (23) $474
  • Director/MD (12) $423
  • NA (6) $322
  • 3rd+ Year Associate (24) $287
  • Manager (4) $282
  • Engineer/Quant (71) $274
  • 2nd Year Associate (30) $251
  • 1st Year Associate (73) $190
  • Analysts (225) $179
  • Intern/Summer Associate (22) $131
  • Junior Trader (5) $102
  • Intern/Summer Analyst (249) $85
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Betsy Massar's picture
Betsy Massar
99.0
3
Secyh62's picture
Secyh62
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
DrApeman's picture
DrApeman
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
kanon's picture
kanon
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”