agree with both above... at the same time if you start a new thread guys like me won't see it cause elitechatter is not what it was... not a big deal but... to facilitate any discussion that may ensue and to eliminate clutter, allow me to skip modifiers such as "generally" "often times" "almost" etc in my view: prob with family offices and UHNW types is they don't want to be first either, therefore one has to go with a seeder / seeder type terms practical example: my partner and i are running $50m, chump change under any weather. it's a credit fund. ok now u can laugh, cause $50m really is the change on chump change... but hey, it's better than when we started with $2m... and stop pissing your pants u lot! ok great. r we paying ourselves? not 1 cent. ok i'm lying but not a lot. seriously. so how did we get the $50m, after knocking on a million doors in a million places? and both of us coming from CSFB with the right creds etc, plus the right sort of people on the investment board etc (well, that's what we think...). by getting into a one-investor fund deal with a big $6bio credit fund that courted us from the start cause notably they didn't have a leg in Asia, had been to Harvard law school with my partner 20 years ago, in short, trusted him. It still took 16 months to get the paperwork agreed and the structure in place... sure, there was a whiff of crisis in 2009-10 and that did cause some distraction... whatever... anyway my point is, the terms were and are shit, but shit was all there was on the menu back then, and i haven't observed any significant change to that even recently... and believe me, i am looking... over to u sarfa'
Out of curiosity, what did you do when you were at the startup stage? This isn't much credit you can do with two bucks...
exactly. now looking back at 2008-09 as banks had massively shrunk their credit allocations to corporates that were looking for refi opportunities, as an ex-credit head and well known in the credit space by both the banks (credit teams) and the corporates (clients), my partner was welcome to look at the big banks' pipeline and take nibbles of any deals coming up for refinancing. In the hope that he would be able to raise more $ and take bigger nibbles quick, cause then it's win win for the big banks, the corporates and us... well that's the theory... in practice money didn't come tumbling down quick on us, i can tell u that...
In all fairness, the market you function in is one of the most capital intensive. Even at $50MM you are small. Whereas in some of the futures markets and in Forex, $50MM is plenty to run a profitable fund. Obviously this depends on the terms from your seeder, and in your case you really need a lot of seed capital, which means your terms weren't really negotiable in your favor. Others shouldn't face these issues, but I've heard of some pretty horrible terms from fundraisers. One recently that I heard was 80/20 split of all fees. 80% for the fundraiser and 20% for the manager. I've heard of a couple other 50/50 splits too. I don't use a seeder, but I do use a third party marketer, and they get 20% of my fee revenue from the clients they introduce. If a manager is using a seeder instead of capital intro, they should expect to get less than 25% of profits, because the seeder isn't a fundraiser, he is just a big client. And because he is taking a chance as the first client, he should probably expect something more like a 1/10 fee structure. When a client is intro'd via a 3PM, that client doesn't have nearly as much leverage to negotiate the fees down, because the 3PM is just gonna bring in the next potential client if that one passes by.
hey, fund managers: Please trade crude oil. It's a fast way of increasing your money. Take your clients' money and trade crude oil. I will be waiting for you.
Hi Fellows: What are the seeder type terms in your experiences? How does a manager decide the minimum investment amount of his investment program? Is the minimum investment amount of an investment program important or critical in raising assets? Thanks in advance!
thats one for surfer if he is still a 3pm. there are some quick answers here but really the prob with seeders is they want a chunk of the investment mngt/advisor vehicle, on top of already tight 1/10 or much less type terms. it can get very unreasonable. from seeder point of view lockup terms are more important than min investment size in my experience, not just in recent years.
Question for current CTA's out there. Understanding that most traditional compensation plans are a 20% performance fee, possibly a high-water mark, and possibly a hurdle rate. Now how often do you charge that performance fee? Do most CTA's charge on a monthly basis or annual basis?