Taussig Capital AG and its wholly owned subsidiary, First International Capital Ltd., partner with hedge fund (“HF”) and fund of hedge funds (“FoHF”) managers to launch innovative financial services startups. Each startup usually allocates most, if not all, of its investable assets to one or more hedge fund-like strategies managed by the given HF or FoHF manager who sponsors the startup.
The startups usually raise initial equity capital or commitments of equity capital of more than $100 million through a Private Placement and/or a Public Offering. These startups have included insurers, reinsurers, banks, and Special Purpose Vehicles (for structured products linked to hedge funds and for risk linked securities).
Each new company is usually started for one or more of the following three reasons:
(1) Raise significant amounts of permanent and semi-permanent capital;
(2) Provide significantly better returns without a proportionate increase in risk;
(3) Monetize the fund manager without loss of control or the messiness of an IPO
Hedge fund managers who manage more than $100 million and fund of hedge funds managers who manage more than $250 million can potentially generate $300 million to $1 billion of new permanent and semi-permanent assets under management (“AuM”).
Hedge fund managers with more than $250 million AuM and fund of hedge funds managers who manage more than $1 billion can potentially generate $3 billion to $13 billion in incremental permanent and semi-permanent capital.
Hedge fund managers who manage more than $1 billion and fund of hedge funds managers with more than $5 billion in AuM can potentially generate all of the incremental permanent generated or semi-permanent capital that they are able to manage without diminishing returns.
Taussig Capital acts as a consultant for setting up each company, helping it in its initial operations (on some occasions), and ongoing risk management. First International acts as an investment banker for raising the initial equity capital for the startup and the premium or deposit generated assets that are allocated to the HF or FoHF strategies of each sponsoring manager.
While there can be no guarantees on future performance, it is likely that investors in such one of these insurers or reinsurers (including any capital committed by the HF or FoHF managers) might be able to achieve 10 year returns that are 10 times (22 times for some taxable investors) greater than a similar amount directly invested in an identical HF or FoHF strategy over the same period of time. Furthermore, it should achieve this significantly better result without incurring a proportionate increase in risk.
In banking, 10 year returns that are 20 times (45 times for some taxable investors) greater than the return of a direct investment in the HF or FoHF strategy is more than possible without a proportionate increase in risk.
If everything goes according to plan, each and every year, the incremental management and incentive fees on the permanent and semi-permanent capital (that the HF or FoHF manager would otherwise have no opportunity to manage) could possibly exceed even a significant investment on his or her part.
Most hedge fund and funds of hedge fund managers have worked for investment, commercial, or private banks in the past. For each of them, the question is simple.
Would he or she rather manage assets for a fund as he or she does today or manage all of the investable assets for a bank which he or she controls (with its far greater resources, permanent capital, and gravitas) and still be paid as he or she does today? If the answer is the bank or if the HF or FoHF manager is unsure of the answer, it will be worth his or her while to carefully read the rest of the content of this web site.