09/19/2012

NewAlpha Seeks US Partner for Seeding Effort

Hedge fund seeder NewAlpha Asset Management, which until now has raised capital mostly in Europe, is setting its sights on the U.S.

The Paris firm will soon begin searching for a U.S.-based asset manager or deep-pocketed investor to form a joint venture that would back startup and early-stage fund operators. The partnership presumably would target U.S. managers, possibly mirroring an Asia-focused seeding business that NewAlpha formed last year with Singapore-based Woori Absolute Partners. NewAlpha already has experience investing in the U.S., where its seedlings include Armored Wolf of Irvine, Calif., G Capital of Red Bank, N.J., and Pamli Capital of New York.

NewAlpha, a unit of Paris-based Ofi Asset Management, has made 20 seed investments since 2004, and currently manages $450 million via deals with eight fund shops that have a combined $3 billion under management. It typically invests $25 million to $50 million per deal. Instead of seeking an equity stake in the management firms, as many fund backers do, NewAlpha takes a cut of the management and performance fees collected by the underlying funds.

The firmís flagship seeding vehicle, NewAlpha Genesis 4, has deployed 75% of its approximately $160 million of equity capital so far. The fund is set to make at least one other investment before yearend, putting NewAlpha on track to begin raising capital for the next fund in the series in 2013. The firm hopes to collect $300 million for a fifth fund.

The firm also runs an entity dubbed Emergence that has raised $200 million from French institutions with a mandate to back emerging managers in France. NewAlpha hopes to raise another $100 million for that vehicle by November.

Meanwhile, the NewAlpha-Woori partnership is set to hold a first equity close before the end of the year, with the two firms contributing a combined $50 million. The goal is to raise another $100 million of outside capital next year. The joint venture plans to invest $25 million apiece in startup fund shops primarily in Australia, Hong Kong and Singapore.

Altogether, itís shaping up to be a busy fourth quarter for NewAlpha, with as many as five seed deals set to close across its various vehicles and partnerships.

In July, the firm hired Nicolas Vathier as chief operating officer to help lead the expansion efforts. He had been working as an independent risk consultant and previously helped run Ofiís quantitative-investment strategies. NewAlpha currently is looking to hire one or two analysts.

Over the past year or so, several international joint ventures have formed to invest in early-stage hedge fund firms. For example, Seattle investment manager Northern Lights Capital teamed up with fund-of-hedge funds manager Hermes BPK Partners of London, while Amsterdam-based IMQubator joined forces with Synergy Fund Management of Hong Kong.

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