Tages Capital LLP is one of the most active and experienced providers of seed and acceleration capital to emerging alternative fund managers. Tages Capital has invested over $700m of seeding/acceleration capital across 15 transactions over the past 4 years and is part of Tages Group, an independent, partner-owned international asset management and banking group founded in 2011 with over $17bn in assets today. A number of the original Tages investment team partners, including CIO Salvatore Cordaro and Head of Seeding Strategies Mark de Klerk were previously part of the Credit Suisse multi-manager business based in London.
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In this Opalesque.TV BACKSTAGE video, Mark de Klerk points out that the current supply / demand dynamics in the industry are very positive for seed investors. Despite various challenges and depressed returns in the era of central bank intervention, low volatility and high intra sector and asset class correlation, many traditional hedge fund investors and private equity allocators are increasingly partnering with dedicated seed investors such as Tages for various reasons.
Traditional hedge fund investors view seeding as a way of enhancing returns in a low yield environment. They are looking to benefit from participation to what is still a very high margin industry which comes at no additional cost to their fund investment. Seeding provides the investor with a positive convexity to their portfolio as the revenue share contribution can only ever be positive. This can be the difference between targeting a 12-15% net IRR as compared to targeting a 5% net annualised return in a relatively low volatility portfolio. Investors can also benefit from access to low fees and preferential capacity rights.
Allocators coming from the private equity side like the fact that the investor has a natural exit via fund redemption rights, portfolio diversification benefits and numerous contractual downside protections. The target IRR compares favourably to what they are currently being offered in the private equity space but with a much lower expected investment duration and arguably at a more favourable point in the investment cycle as compared to funds currently being raised in the private equity space.
Mark also talks about:
- How is Tages differentiated from other seed investors?
- Why seeders could actually benefit from the ongoing maturation of the industry
- How seeding is different from buying minority GP equity stakes: Often lumped together, but with far different risks and rewards
- The main criteria Tages is looking for in an ideal seeding prospect
- Benefits that seeders can negotiate and provide to investors
- The role of risk factors and how seeders manage the down side risk
- Tages’ current seeding pipeline: a high quality opportunity set
Mark de Klerk is PM and Head of Seeding Strategies for Tages Capital. He joined Tages in June 2011 as a day one partner. He is the former Head of Operational Due Diligence responsible for European based managers at Credit Suisse Asset Management and Global Head of Due Diligence at Credit Suisse International where he was a Director within the Fund Linked Products group. Prior to joining Credit Suisse in 2005, Mark worked in various roles including Equity Research, Corporate Planning and Product Control for Morgan Stanley, Merrill Lynch, Credit Suisse and UBS. Mark qualified as a Chartered Accountant with Ernst & Young in 2000 and is a CFA Charter holder. He holds a honours Degree in Business Science from the University of Cape Town.
Article by Opalesque.TV
