Episode summary
GP Seeding, Hedge Funds & Manager Research with Borealis Strategic Capital Partners
Dakota Live!
· · Hosts: Robert Morier · Guests: Scott Schweighauser
Summary
Scott Schweighauser traces his path from trading and derivatives into hedge fund manager selection, arguing that crisis experience is what taught him the emotional and analytical realities of risk. He connects that background to Borealis Strategic Capital Partners’ focus on early-stage hedge fund seeding, where the challenge is not just finding talent but identifying grit, character, and a manager’s ability to perform through stress.
A major thread is the history of hedge fund investing: a small, relationship-driven industry in the 1990s gave way to rapid institutionalization, a hedge fund boom, the 2008 crisis, and then a much harder environment for traditional fund of funds. Scott argues that Borealis saw an opening in seeding precisely because the post-crisis market made emerging managers harder to back, even as the first years of a manager’s life cycle often produced the strongest results.
He explains Borealis’s structure as a way to create alignment: large seed checks, lockups, discounted fees, no GP ownership stake, and a revenue-share model that can continue even after capital is redeemed. The firm’s process emphasizes qualitative due diligence, reference checks, and a “devil’s advocate” review. He says the goal is to partner with differentiated managers in white-space strategies, help them build durable businesses, and support fundraising earlier through business development.
Key takeaways
- Scott says the biggest shift in hedge funds has been greater institutionalization and a much larger, more competitive universe of managers.
- Borealis views seeding as attractive because the first three years of a hedge fund can outperform the long-term track record by 400 basis points, according to a white paper Scott cites.
- Scott says Borealis avoids GP stakes because ownership can create buyout pressure and disputes, while revenue sharing and fixed-time participation better align interests.
- The firm looks for managers with grit, integrity, and a credible backstory, and it starts reference checks at the beginning rather than the end of diligence.
- Scott argues that the best opportunities are in differentiated, capacity-constrained, “off-the-run” strategies that do not fit easily into platform or pod-shop models.
Notable quotes
“Character is destiny. And and so we're looking for people who have the highest caliber of integrity and grit and leadership and determination and focus and intensity”
How the episode opens
Welcome to the Dakota Live podcast. I'm your host, Robert Morier. The goal of this podcast is to help you better know the people behind investment decisions.
We introduce you to chief investment officers, manager research professionals, and other important players in the industry who will help you sell in between the lines and better understand the investment sales ecosystem. If you're not familiar with Dakota and our Dakota Live content, be sure to check out our website at dakota.com. Before we get started, I need to read a brief disclosure.
Nothing contained herein constitutes an advertisement, an offer to sell, or solicitation of any offer to buy any securities or investment services. This content is provided forformational purposes and should not be relied upon as recommendations or advice about investing in securities. All investments involve risk and may lose money.
Dakota and Borealis do not guarantee the accuracy of any of the information provided by the speaker who is not affiliated with Dakota. This is neither a Dakota nor a Borealis solicitation testimonial or an endorsement by Dakota or its affiliates. Nothing herein is intended to indicate approval, support, or recommendation of the investment adviser or its supervised persons by Dakota.
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From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- gp seeding
- hedge fund history
- emerging managers
- manager research
- alignment in seed deals
Companies and tickers mentioned
- Borealis Strategic Capital Partners
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Dakota Live!, this episode and its artwork belong to Robert Morier. Octagon is not affiliated with the show; this page is an independent summary.
