Asset Alliance Hedgies Divvy Up Fees

30 Jun

Hedge fund startups need help raising capital, and one way to attract seed investors is by making them partners, Bruce Lipnick, founder and CEO of Asset Alliance, told Markets Media Thursday.
“The investor is getting leveraged return without the leverage,” he said. “And the fund manager gets
much needed capital.”
Asset Alliance provides seed capital to smaller hedge funds that are either starting out or are looking to replace capital that was withdrawn during the economic downturn. “We see an opportunity to help
reseed hedge funds, including those with liquid investments and good track records.”
Here’s a hypothetical example: A seed investor provides 25 percent of a hedge fund’s initial $100
million in capital; in return, the investor gets a 25 percent stake in the manager’s total return, including
performance and incentive fees.
A typical hedge fund manager earns two percent of the fund’s assets (the management fee) and 20
percent of the return after deducting the management fee (the incentive fee). So in this example, if the
manager achieves a 14.5 percent gross return on assets, he or she would pocket $4.5 million in fees
(two percent of $100 million plus 20 percent of the $12.5 million net return).
The seed investor would get 25 percent of that $4.5 million ($1,125,000), plus the 25 percent of the net
return on the seed investment net of management and incentive fees ($2.5 million) for a total of
The seed investor continues to get a 25 percent slice of the management and incentive fees no matter
how large the hedge fund grows; so the potential return on the initial $25


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