Seed investment activity shifts towards private credit strategies
New research by Seward & Kissel has revealed a continued shift in seed investment activity towards private credit strategies, marking a move away from historical emphasis on hedge funds and other liquid products.
Illiquid or closed-end fund structures, such as those focused on private credit, continued to be very popular in 2024, with these transactions driving an evolution in many of the core terms of a seed investment, according to the 2024 Seward & Kissel Seed transaction Deal Points study.
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“While most seed investments involve managers focused on liquid strategies (e.g. hedge funds and liquid credit-focused products), each year we also see numerous seed investments in private equity or private credit funds, a category of seeding that has been growing tremendously in recent years,” the report said.
“Based upon observed trends, it would not be surprising if private equity/private credit seeding ultimately equaled – or even exceeded – the hedge fund seeding category.”
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The report explained that GPs of private credit vehicles are interested in obtaining a seed deal for largely the same reasons as hedge fund managers: a critical mass of assets under management at the initial closing, and the endorsement by a large allocator of the GP’s strategy, track record, and team.
It concluded that it expects seeding activity in this area “to grow in the foreseeable future”.
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