The Case for a Venture Partner Model

Sascha Klamp, CEO of CITE, reviews the shortcomings of the nascent fund manager distribution approaches and argues for a more widespread use of the holistic venture partner business model in asset management.

Initially, it took allocators some time to fully comprehend the implications of the market events and the impact it had and still has on the funds industry. But once the initial shock-and-awe moment settled, redemptions across the fund of hedge funds landscape accelerated. As a consequence, the number and size of funds of hedge funds (FoHF) are riding down an inverse S-Curve.

While the initial redemptions were sluggish and appeared to be a drop in the ocean, this trend has now accelerated as larger allocators adjusted their investment and operating models to focus on sourcing and building internal hedge fund investment capabilities. For the first time, many FoHF analysts were confronted with writing redemption tickets rather than filling in subscriptions documents.

The natural assumption was that single-manager hedge funds would suffer and follow the decline of their largest source of capital pre-2008. Far from it: after an initial phase of decline in assets under management, which was long overdue no doubt, hedge fund assets have now surpassed the pre-crisis levels (previous peak $1.95 trillion in June 2008 versus $1.97 trillion in November 2013, according to Eurekahedge, 2013).