Key features of the new fund are:
• Targeted Returns: 12-14% with annualized volatility of 5-7% over the medium term;
• Manager Selection: Investors will benefit from Investcorp’s manager selection expertise and extensive knowledge of the hedge funds industry.
• Risk Management and capacity: investors will be given access to early stage funds within a controlled risk framework.
• Diversification: The initial portfolio will be composed of approximately 15-20 managers.
• Liquidity: The fund offers quarterly liquidity with a one-year lock up period.
Investcorp is a highly experienced manager of early stage funds within its hedge fund programme, having invested with over 50 ‘early stage’ funds over the last 10 years. In 2004 Investcorp established a Single Manager Platform (‘SMP’) to seed emerging hedge fund managers, giving its investors access to emerging hedge fund managers. Investcorp has since entered into seeding arrangements with four managers and expects to fund 3-4 additional seeding arrangements a year.
Early stage funds are typically set up by experienced money managers who have recently left other hedge funds or investment banks, or by managers who have existing funds and are launching a new vehicle to focus on different strategies. Investing in early stage funds has proven to bring significant advantages: early stage funds have the potential for strong performance because they often bring the newest investment thinking; they focus on superior near-term opportunities in specific niches; they are hungrier to develop a successful business; and they are more nimble in executing trades.
Any fund in which Investcorp invests during the first 12 months of that particular fund’s operation, whether for the Investcorp SMP or the wider Investcorp $5 billion hedge funds program, will be included in the IESF. The IESF thus fully utilizes Investcorp’s rigorous manager selection and industry-leading risk management processes to identify and monitor leading early stage funds.
Deepak Gurnani, Managing Director and co-head of the Investcorp Hedge Funds program said: “The Investcorp Early Stage Fund is a unique investment opportunity which provides access to promising early stage funds, while minimizing the potential issues investors face in investing with such funds. Investors will have the benefit of immediate diversification, with quarterly liquidity and an anticipated attractive return and volatility relationship over the medium term.”
Ibrahim Ghaghour, Managing Director and co-head of the Investcorp Hedge Funds program added: “All of Investcorp’s investments in early stage hedge funds are subject to our rigorous screening and monitoring processes, and have resulted in superior risk-adjusted returns over the last ten years. Since 1996, Investcorp has invested with more than 50 funds within the first 12 months of their launch, and today we manage approximately $1 billion in early stage investments. An equally-weighted portfolio of these early stage investments would have had an annualized return of 15.27% per annum with a volatility of 5.80%, demonstrating our strong track record in relation to the target returns on our new fund.”
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