Alpha Magazine has published a piece by written by myself and Andrew Saunders. Below is an excerpt. Click the link to download the article in it’s entirety or pick up your copy of the Dec 2008/Jan 2009 issue of Alpha Magazine.
The traditional model of raising alternative assets relied heavily on assistance from the two pillars of hedge fund marketing — third-party marketers and prime brokerage capital introduction services. Hedge funds came to expect that these out-side actors could handle most capital-raising needs and eschewed investment in internal talent and infrastructure to manage marketing and business development.
Early this decade the strategy seemed to work, largely because the pools of both hedge fund talent and sophisticated investors were limited. Yet from 2004 to 2007, as the industry more than doubled in size, too many funds were vying for investor dollars. Introductions alone were not enough to win assets, so prime brokers and third-party marketers focused almost exclusively on bigger funds that could absorb larger investments and generate higher fees. In the past two to three years, it was extremely difficult for funds with less than $500 million to receive any meaningful attention from either group.