Goldman Sachs Group Inc is seeking money to bankroll fledgling hedge funds, its second attempt since 2008 to break into a business now dominated by Blackstone Group LP, according to three people with knowledge of the plan.
The bank has spent the past year trying to attract clients for a seeding fund, which provides managers with start-up investing capital in exchange for a cut of their fees, said the people, who asked not to be identified because the effort is private. Blackstone recently raised $2.4 billion for its second seeding fund, the industry’s biggest.
Reservoir Capital Group, Larch Lane Advisors LLC and PineBridge Investments LLC also are marketing new funds, saying it’s a good time to back startups because after the financial crisis investors are reluctant to trust even talented traders going out on their own. Goldman Sachs, based in New York, shut a fund in 2008, underscoring that betting on new managers can be tricky even for one of Wall Street’s savviest firms.
“Seeding isn’t an easy-money business,” Alexis Graham, co-founder of Acceleration Capital Group, a New York-based firm that works with seed investors, said in a telephone interview. “There are only a small percentage of people out there who can consistently outperform, build a business and scale assets.”
SLICE OF FEES
Seeders generally invest $100 million to $150 million in a hedge fund, providing a pool of capital to help the manager begin trading. In return, the seeding fund gets 15 percent to 25 percent of the hedge fund’s fees.
