Hedge fund seeding via fees-for-seed swaps under idiosyncratic risk
Ewald, Christian-Oliver and Zhang, Hai (2016) Hedge fund seeding via fees-for-seed swaps under idiosyncratic risk. Journal of Economic Dynamics and Control, 71. pp. 45-59. ISSN 0165-1889
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Abstract
We develop a dynamic valuation model of the hedge fund seeding business by solving the consumption and portfolio-choice problem for a risk-averse manager who launches a hedge fund through a seeding vehicle. This vehicle, i.e. fees-for-seed swap, specifies that a strategic partner (seeder) provides a critical amount of capital in exchange for participation in the funds revenue. Our results indicate that the new swap not only solves the serious problem of widespread financing constraints for new and early-stage funds (ESFs) managers, but can be highly beneficial to both the manager and the seeder if structured properly.
ORCID iDs
Ewald, Christian-Oliver and Zhang, Hai
ORCID: https://orcid.org/0000-0001-9319-346X;
Item type: Article ID code: 60471 Dates: DateEvent31 October 2016Published5 August 2016Published Online11 July 2016AcceptedKeywords: hedge funds, investment, real options, risk-averse, portfolio-choice, consumption, dynamic valuation model, seeding vehicle, early-stage funds managers, Management. Industrial Management, Control and Optimization, Economics and Econometrics, Applied Mathematics Subjects: Social Sciences > Industries. Land use. Labor > Management. Industrial Management Department: Strathclyde Business School > Accounting and Finance Depositing user: Pure Administrator Date deposited: 19 Apr 2017 14:27 Last modified: 30 May 2021 00:38 Related URLs: URI: https://strathprints.strath.ac.uk/id/eprint/60471
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