Deutsche Bank and Financial Risk Management, the investment specialist and advisory business, have partnered to roll out a hedge-fund-seeding managed account platform, which these firms say represents a ground-breaking move.

Called the dbalternatives Discovery platform, it is based on Deutsche Bank’s dbalternatives managed account platform, expanding its reach into the process of seeding new funds.

With hedge fund seeding, backers of funds look to pick promising vehicles and managers, guiding them through the launch process. In return for committing capital, seeding investors receive fund returns and a share of the manager’s revenue. Managed accounts are segregated portfolios directed by a hedge fund manager. Although a small share of the overall $2 trillion-plus hedge fund sector, managed accounts have become increasingly attractive to investors since the 2008 financial crisis due to their perceived superior liquidity. An investor knows which holdings a hedge fund is invested in and can rapidly liquidate those holdings.

FRM, through its hedge fund seeding division FRM Capital Advisors, will select and negotiate strategic investments in emerging managers which will be made through managed accounts on the dbalternatives Discovery platform. Deutsche Bank will also raise capital for a seeding fund which will invest in early stage hedge funds selected by FCA.

“dbalternatives Discovery is set to reinvent hedge fund seeding through the introduction of managed accounts, which we believe are crucial when investing in emerging managers. Whatever the pedigree of the manager, it’s in these early stages that close monitoring of risk and style drift are most essential,” said Stephane Farouze, Deutsche Bank’s global head of fund derivatives.