The Sales Cycle in the “New New” HF Reality
By Andrew Saunders
Last week I attended the IMI alternative investments consultants summit. This was my first IMI event and I was impressed by the quality of speakers and their willingness to share. Education was the goal and everyone left better informed.
In a panel entitled, “The New Sales Cycle,” representatives from Casey Quick, Lyndhurst Consulting and UBS Financial offered their take on what funds must to to be successful in the “New New” hedge fund marketing cycle.
Much of this will strike you as common sense… and that’s the point. The go-go years are behind us, and while the opportunities to make money are varied, the opportunities to raise capital are few. We’re back to marketing basics.
“There are few things to get eliminated on. 1) Madoff – if you had Madoff exposure, might as well change name seek a new line of work 2) Gating – how did you treat investors – if you had to gate then there was a serious liquidity management issue. 3) Returns – consultants will put more weight on lower returns without gating. When you look at FOF returns over the last decade, the dispersion was minimal for until last year and that blew out. 4) Larger FOFs will be the trend. As FOFs represent 50% of hedge fund assets, they are an important channel. In fact they are half a utility, half a manager. Source of great frustration is the low portfolio turnover. Smaller funds are challenged because of the utility function. Top 40% control 80% expect top 25% held 80% of the assets in the future.”
Help Consultants Help You:
- Understand that consultants put their reputation on the line by recommending you. Make their job as easy as possible.
- Attrition in the number of funds is not a bad thing – there were too many to begin with and it is difficult to make the case of why the world needs another equity long/short manager
- Learn yourself, then match yourself with the right consultant. Consultants are looking for different things. Not all are interested in smaller managers. Some might only want brand name shops. Call and ask questions – don’t waste time.
- Don’t come in selling – come in asking questions. “Hi, my name is xx and I was curious if you are looking at Hedge Funds?” or “Hi, my name is xx, we have a mortgage strategy and I would like to share my view on the RMBS space” is a lot more appealing than, “Hi, My name is xx and we have a RMBS fund with xx returns, xx vol would you like to schedule a meeting?”
- Have high quality service providers. Is it fair…? no, but it is now a given.
Organizational Issues Important To Consultants
“Difference between good and great is everything to do with working environment. Execution is the best when people are happy at work. How well capitalized are you? Do you have the ability to withstand time when no assets are coming in/ How well are people compensated?”