Day One and Early Stage Investor Allocations to Hedge Funds (Citi)

February 2012

KEYWORDS: Hedge Fund Launches, Early Stage Investors, Institutional Investors, early year performance, Day One

Authors:

Citi's U.S. Business Advisory Team

Organizations:
  • Citi

Summary:

The majority of investors making allocations to newly launched hedge fund managers either upon launch (Day One) or within the first 12 months of their existence (Early Stage) do so opportunistically rather than through a dedicated emerging manager program, evaluating such managers alongside more established funds. These investors differ from seeders in that Day One and Early Stage investors may negotiate preferential fees or terms, but they do not take a financial stake in the fund or the manager. Interest in Day One and Early Stage investments reflects the investor’s desire to benefit from a manager’s early years of performance and the opportunity to lock in capacity early with high potential funds.

The U.S. Business Advisory team’s new industry whitepaper, “Day One and Early Stage Investor Allocations to Hedge Funds” is the result of over 90 qualitative interviews and quantitative surveys conducted with Day One and Early Stage Investors including fund of funds, family offices, private banks, and endowments as well as hedge fund managers that successfully attracted Day One and Early Stage allocations. Investor participants were surveyed to determine key trends that have emerged since 2008 and to better understand the most important factors they consider when placing capital with new managers. Hedge fund managers surveyed provided insight into the process of meeting with and successfully receiving new capital from Day One/Early Stage investors.

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