Antoine Rolland of NewAlpha Asset Management talks about how the firm changed its business model for new clients and picked up a number of innovative partnership deals along the way.
When NewAlpha joined OFI AM in late 2008, Rolland realised he had the potential to build a dedicated hedge fund incubator, industrialise the seeding process and become a recognised brand name.
Rolland is outspoken in his quest for recognition. “We want to become the number-one [hedge fund seeder] in the world, and we’re not far off this target,” he declares.
Part of his confidence stems from the deals NewAlpha has recently engaged in. One is with Emergence, a French national seeding fund established in August 2011 in an attempt to boost the French hedge fund industry by attracting new managers to Paris. NewAlpha has been called in as the country’s seeding specialist to help structure and initially manage the fund.
The second agreement is with Woori Absolute Partners (WAP), a Singapore-based alternative investment management company that is part of Woori Financial Group, a Korean financial holding company. NewAlpha and WAP formed a strategic partnership to launch a seeding vehicle for emerging hedge fund managers focused on the Asia-Pacific region.
NewAlpha has inspired such confidence in Europe and Asia because it seems to be offering a win-win deal to investors who receive the return from the emerging managers’ accumulated performance over the minimum investment period (two to three years). They also receive a cut of the managers’ fees spanning the whole investment period (seeding and development can last up to ten years). If the emerging managers do well, NewAlpha’s investors benefit twice over.
Rolland is convinced a fund performs best in its early years, while it is nimble and unencumbered by assets and mandates. This arrangement therefore avoids the conundrum of weaker performance later in the fund’s life: as assets grow, so does the fee intake, which NewAlpha has a stake in regardless of how the fund performs.
NewAlpha’s seeding vehicles are labelled NewAlpha Genesis, and to date it has launched four. NewAlpha Genesis III provided an annualised internal rate of return of 9.2% from June 2008 to October 2010. NewAlpha allocates on average €25 to €50m to each emerging manager and has set up 17 seeding contracts since its launch in 2003. The company has only cut a contract short once.
“We can cut a contract if a manager loses money,” Rolland warns.