Last week I had the privilege of representing BVI Finance, the voice of the British Virgin Islands’ financial services industry, by being a panellist at the Hedge Fund Emerging & Startup Manager Forum in New York. I joined some leading industry experts on a panel focused on how to structure your fund as an emerging manager. As we’ve previously mentioned on this blog, emerging managers form a core part of our BVI funds practice, and this was an excellent opportunity to give some practical advice to those emerging managers in the audience.
Whilst the day was full of fascinating insights, a key take-away for me was the difficulty that emerging managers are facing when looking for seed investment. The message was loud and clear; unless you have a minimum AUM of US$100m, you won’t even get past first base when it comes to the majority of professional seeders. This begs the question how you get to US$100m in the first place – classic chicken and egg/catch-22 territory. There’s no easy solution, I’m afraid; the key is to start with friends’ and family money, and build a track-record over a period of at least two to three years that simply cannot be ignored by professional seeders. Only then can you begin to approach the bigger ticket investors with a degree of certainty that you won’t have the door slammed in your face.
In light of this, it was no surprise that I was inundated with questions about our new funds product in the BVI; the incubator fund. As we’ve previously mentioned, this product was designed with an absolute focus on the emerging manager who is looking for a cost-effective, light-touch regulated fund with which to use friends’ and family money to test their strategy. In an age of generally increasing regulatory red-tape and costs, the emerging managers I spoke with that day were able to breathe a (small) sigh of relief that the BVI is looking out for them.