Ewald, C. and Zhang, H. (2016) Hedge fund seeding via fees-for-seed swaps under idiosyncratic risk. Journal of Economic Dynamics and Control, 71, pp. 45-59. (doi: 10.1016/j.jedc.2016.07.007)
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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.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Ewald, Professor Christian and Zhang, Mr Hai |
| Authors: | Ewald, C., and Zhang, H. |
| College/School: | College of Social Sciences > Adam Smith Business School College of Social Sciences > Adam Smith Business School > Economics |
| Journal Name: | Journal of Economic Dynamics and Control |
| Publisher: | Elsevier |
| ISSN: | 0165-1889 |
| ISSN (Online): | 1879-1743 |
| Copyright Holders: | Copyright © 2016 Elsevier B.V. |
| First Published: | First published in Journal of Economic Dynamics and Control 71: 45-59 |
| Publisher Policy: | Reproduced in accordance with the publisher copyright policy |
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