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    Seed-Capital Investor Extends Reach to Europe

Seed-Capital Investor Extends Reach to Europe
Hedge Fund Alert – November 9 , 2016


Stride Capital, a hedge fund-seeding operation led by former SkyBridge Capital partner Don Rogers, has picked up its first non-U.S. manager.  Last month, Stride invested an undisclosed sum with London-based Monterone Partners, led by former Davidson Kempner Capital managing director Markus Taraba.  The Monterone Partners fund, which takes long and short positions in European stocks, generated a 19.4% return during its first 12 months of trading, through Aug. 31. During the same period, the MSCI Europe Local Index fell 6.2%.

Stride, of Stamford, Conn., typically deploys $25 million to $50 million apiece to the startups it backs, providing additional support in the areas of business management, product development and risk management. In exchange, it pockets a share of the managers’ fee revenues, while also participating in any investment gains.

Through Sept. 30, the five managers in Stride’s portfolio had generated an average year-to-date return of 10.2%. Four of the five were up by double-digit percentages. Meanwhile, one seed, Barnstar Asset Management, liquidated its fund at the end of the first quarter following sharp losses.

Writing to his investors last week, Rogers said the position in Monterone “establishes a new foothold for Stride outside the U.S. as we look to execute on our global investment and business-building mission.” He pointed to unusual fee terms offered by Monterone, including a sliding-scale management fee that could drop as low as 75 bp, depending on asset growth, and a hard 6% hurdle the fund has to reach before limited partners are charged performance fees.

“Few seeders would embrace this type of structure, but we believe it is a sensible approach that matches the return objectives of the fund,” Rogers wrote.
Stride’s other investments include stakes in Greenhaven Road Capital, LRV Capital, North Elm Capital and VIEX Capital (formerly Vertex Capital). VIEX, an activist shop that recently secured temporary representation on the board of data-storage company Quantum, was up 13% year-to-date as of Sept. 30. North Elm gained 12.7% during the first nine months of the year. The firm is led by David Rockwell, who previously co-founded Tiger Management seed North Oak Capital.
Rogers typically raises equity for seed investments on a deal-by-deal basis, but he’s now talking to investors about forming a commingled seed-capital fund. “Traditional hedge fund seeding has suffered from a focus on building what is already popular, prioritizing rapid AUM growth over credible differentiated strategies,” he wrote in the letter. “Stride challenges this traditional seeding model by focusing on long-term structural advantages, the persistence of a manager’s investment opportunity and their ability to execute.