Friday 8th of June: World’s best class Hedge Fund Managers, International Allocators, and expert service providers met in Amba Hotel in London, to share the preliminary results on AIMA‘s next survey: ‘Making it big’. The idea is to track and replicate the evolution of a Hedge Fund from start-up to a billion dollars in assets under management and beyond.
So, let’s get to it. What did we learn?
From basement to boardroom: Managing the operations of the hedge fund business.
1. Before outsourcing, make sure you got the ‘why’ behind right:
-Do you want to bring in expertise?
-Do you have too many responsibilities under your belt?
-Is it just cheaper to do so?
Answering those questions will help you understand to whom and how you should approach this topic. Another thing to consider: How are you going to stop outsourcing, and bring it back in-house? You need to have specific goals and milestones in your plan, otherwise, it’s a game against time. You need to eventually to do so, so plan ahead.
TLDR; Outsourcing is a good option for the beginning, but make sure you hire the correct people and have a concrete ‘exit’ plan in mind.
Finding and mining: Raising and maintaining assets for the hedge fund business.
1. Hiring a Key Marketer/BD manager early is super important. This person should be:
– Someone who understands the strategy and the methodology of your fund
– Someone who is flexible (especially in the beginning, there will be lots of pivoting, reviewing and revising of your strategy and key activities. Find a person who doesn’t say ‘ this isn’t what I signed for’)
– Someone who shares the same Business Values as you.
Be open, flexible and commercial
2. Break-even. That sweet moment when you know you finally cracked it. How to reach it?
– Test your strategy and build your track record. Cap intro companies and managed accounts can support you here.
– Create a well-articulated Business Plan, for 3,6 months pre-lunch, and then for 3,6,9,12 months after.
– Show to investors the future of your strategy
– Generate Alpha, and when meeting an investor make sure you are able to demonstrate and articulate what you are doing in a glance. Be prepared for the follow-up Question. HOW? What value do you add to the market?
– Again, answer this question: Why should people care about you and your fund? How are you different from the 100s of funds out there?
3. Marketing. How to start and not lose the vision in those first difficult moments.
– Consistency is the key. Start from the beginning and make sure you build your brand correctly. DDQs, Newsletters, presentations. All should say the same story.
– Marketing is not just about bringing NEW investors to your firm. It’s about creating a world-class IR process and making sure everyone knows what is happening in your fund.
– You don’t get a second chance. Investors need to know that you are serious from the start.
– Hiring a good Marketer is not an option! (see point 1)
While you are head down building your track record, there are still opportunities for you out there. Meet people, lawyers, investors -write thought pieces, white papers, GET your name out there. The industry is fragmented. Keeping an open line with the world is important.
Tomorrow’s hedge funds: what will they look like?
It’s evident that AI will play an important role in Hedge funds, especially to systematic strategies. What is important here, is to see how Technology will support the Hedge funds in their operation side.
1. Build the correct processes.
– Create a ‘rating system’ for your investors
– Pre-qualify before a meeting
– Ask for feedback, every-time.
– Investors receive 100’s of emails every month. You need to be something to be memorable.
– Target the specific allocators for your strategy.
(If you want to see how our tech helps Hedge funds do exactly these, book a meeting here.
Sometimes Investors are just making noies and looking for information. They might not want to invest, at least not at the moment. Make sure it’s a real opportunity. Time is precious.
2. Be tremendously honest with what you do. There are so many investors out there (as Hedge Funds) which means that you will always find the correct match for your fund. Good month? Share the world. Bad month? Share the news! Be an open book to your investors and prospects, and they will gladly come to you when your strategy fits their needs.
3. Review and revise. Like everything else in life, every now and then, check your processes, keep doing what works and change what doesn’t. Eventually, you will find the optimal approach. (having analytics help in this. A LOT)
So this is it, the first meeting of AIMA’s Next Generation Forum. Quite soon, we will share the results of the survey, so keep in tune to get them first. Questions? Comments? Feedback? Let us know!