Small Hedge Fund Investors
Hedge Funds Rejecting New Investors to Stay "Nimble"
In the aftermath of the financial crisis, it was assumed that smaller hedge funds would be severely hit by expensive regulation and investors who favored larger institutional funds. However, three years later, many small and midsize hedge funds are faring quite well, in fact, some are faring too well. At least, that's what one must surmise upon seeing a number of rapidly growing hedge funds actually turn away new investors.
But three years later, some small and midsize managers are flourishing, attracting assets at a rapid rate. Rather than risk their returns, they are just saying no to new investors.
RouteOne Partners and Point Lobos Capital, started by alumni of the approximately $21 billion fund Farallon Capital Management, stopped accepting new money. Brenner West Capital Advisors, which tripled its size to about $480 million in less than a year, did the same this month, according to people with knowledge of the fund. Jericho Capital and the Redmile Group raised hundreds of millions of dollars before turning away new clients.
“There was a period where the bulk of the money was flowing to the very largest players, and now it’s trickling down,” said Dean C. Backer, global head of sales and capital introduction at Goldman Sachs in prime brokerage. “From the manager’s perspective, there are folks who really just want to be disciplined in terms of how they build their business.”
Lakewood, RouteOne, Point Lobos and Brenner West declined to comment. Redmile and Jericho did not respond to requests for comment. Source
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