Byline: Pirkko Juntunen
Tony Stocks, founder of Citco Fund Services, has teamed up with former bankers Mike Wellings and Simon Harman to launch Tennyson Capital Partners, a service provider for early stage hedge funds.As many hedge funds struggle to get off the ground in what many agree is the most difficult capital raising environment in years, Tennyson hopes its solutions for new hedge funds will enable more fledgling funds to succeed.
Stocks, chief executive of Tennyson, says: "We are offering a business architecture and consultancy service that saves entrepreneurs an enormous amount of time, hassle and money, allowing them to focus on doing what they do best - creating alpha."
Start-up hedge funds often struggle to run a business, as opposed to simply running money. One prime broker says: "Before they can even think about trading, start-up managers have to do a great deal of legwork in establishing the infrastructure necessary to run a business. While we as prime brokers can take much of this burden away, we can't eliminate it entirely. We find that lots of start-up managers, particularly those who have come from big institutions, severely underestimate the work involved in this initial period."
However, as the industry becomes more crowded, some hedge funds have expressed concern about the array of start-up services offered.
One start-up manager says: "I am being bombarded by calls from a huge range of institutions, from large investment banks to small service providers. My tendency is to regard all of these approaches with more than a little scepticism. While it is nice to know you have a choice of services, the sheer number of firms jumping on the bandwagon often makes it easier to stick to those providers with whom you have a personal relationship."
Prime brokers tend to take on hedge funds once they have between pound sterling50m ([euro]74m) and pound sterling100m under management. Rather than compete directly with prime brokers, Tennyson will release funds once they have reached this size. It will not seed the funds, but will promote and advise on marketing strategies.
Stocks says that of all the funds Tennyson investigates, only 10% make it to its books and as many as a quarter are deemed hopeless. It has no immediate plans to expand beyond London, but may consider New York and Geneva.
Harman, head of sales at Tennyson, says: "We hope our service will encourage more people to start their own business and that this in turn may solve any potential capacity problems in the industry. …