A new hedge fund launching next year hopes to be the ‘farm team’ for the $5 trillion industry

• Riptide Advisors, a new multi-strategy hedge fund, plans to hire unproven talent as portfolio managers.

• Young PMs who succeed will receive more capital and a path to start their own companies.

• Tyler Erickson, the company’s founder, said he envisions the fund as a mini-consortium in the industry.

Tyler Erickson doesn’t plan to compete with the biggest players in the $5 trillion hedge fund industry — he hopes to help them.

Riptide Advisors, Errickson’s new multi-manager firm which is set to begin trading on January 1, has been created to address the biggest challenge facing the industry: Shortage of talented and experienced portfolio managers.

The focus of the new manager, Erickson said, is to be “basically a seeding vehicle” that allows unproven but promising talent — think an analyst at a large firm like Millennium who has never run a book on his own — to manage portfolios as small as $20 million with the goal of adding capital and liability over time by graduating to the firm’s larger funds.

“We’re almost like a farm league for major league teams,” he said.

While companies focused on launching new launches have been around for decades, Ericsson’s focus on training young investment talent to learn how to trade a multi-strategy construct is unique. It’s another example of the ripple effects of the dominance of the biggest players, which are… Millennium Castle, Point 72, Balyasny, That swelled in size and swallowed up talent.

As Business Insider previously wrote, there’s a cottage industry emerging Consultants and consultants It focuses on helping investment talent navigate these types of hedge funds or get a job in them.

At Riptide, young project managers will need to demonstrate their ability to manage a portfolio and make money within a robust risk system; The company uses Arcana’s risk management platform, designed by former Citadel PM Rich Falk-Wallace. Riptide will then either connect them with specialists in its network interested in supporting them via a separately managed account or allow them to continue trading in-house.

Erickson said Riptide’s premiers will be able to own their track records and won’t have any non-competes to go down, so he expects the majors will also be poaching a lot — a fact he not only understands, but embraces.

“These funds are full of capital. Talent is what we’re all trying to solve the problem for,” said Erickson, who is also chief investment officer at Lodestone Global, an outside investment platform for family offices that is providing capital for the new company.