A new German hedge fund firm has gone direct to small private investors for its initial equity capital in what it sees as a token of German enthusiasm for the industry.

George Nauerz, co-founder of Nauerz and Noell, said his firm had raised €2.5m ($3.3m) for a participation note, paying interest of 8.25% and giving the holders the right to 12.5% of the company's equity. He said the capital had come from advisers to German retail investors and he hopes to raise €50m this year.