Deutsche Bank and FRM, through its hedge fund seeding unit FRM Capital Advisors (FCA), are linking up to seed emerging alternative investment managers using dbalternative’s Discovery managed account platform to make the allocations.  

FRM Capital Advisors will select and negotiate strategic investments in emerging managers, while Deutsche Bank will also raise capital for a seeding fund which will invest in early stage hedge funds selected by FCA.

Through FRM’s global investment team, FCA evaluates over 500 manager seeds annually. The link-up between FRM and Deutsche Bank means investors can now utilise a high quality managed account platform to invest in a seeding fund or to invest directly into emerging hedge funds.

“Structural changes in the hedge fund industry have created a new wave of opportunities in seeding,” said Blaine Tomlinson, FRM’s CEO. “The institutionalisation of the industry has resulted in talented managers needing strategic capital to reach critical mass. In response, we built a well resourced seeding capability to identify these managers and make strategic investments. Now, we are partnering with a leader in managed account platforms with a substantial client franchise to bring seeding to a new level and a wider group of investors.”

Developed in 2002, the dbalternatives managed account platform addresses hedge fund investor concerns regarding fraud, transparency, liquidity and independent valuation. It has grown into one of the leading managed account operators with over $12 billion of assets under management including managed accounts, UCITS hedge funds and exchange traded funds.

"dbalternatives Discovery is set to reinvent hedge fund seeding through the introduction of managed accounts, which we believe are crucial when investing in emerging managers,” said Stephane Farouze, Deutsche Bank’s Global Head of Fund Derivatives. “Whatever the pedigree of the manager, it’s in these early stages that close monitoring of risk and style drift are most essential. The dbalternatives Discovery platform will provide this through the tried and tested managed account infrastructure we have been offering to investors for the last 10 years.”

Hedge fund seeding aims to identify and invest in the funds of promising emerging hedge fund managers and to provide strategic guidance to support their development. In return for allocating capital, seeding investors receive fund returns and a share of the manager’s revenue with the latter allowing the seeder to benefit from growth in the hedge fund manager’s assets.