By Holly Singer, HS Marketing, and Hedge Connection’s Director of Content
At Deal Ring last week, held during the Global Fund Forum, we saw five hedge fund managers pitch to a panel of allocators (Ringmasters), in the style of Shark Tank, before a live audience. Under the tutelage of James Rosebush, we witnessed presentations that were clear, cohesive, and persuasive.
Prior to the presentations, James Rosebush spoke to the audience, and offered some of the tips he had been telling the managers over the past three days of coaching. These included:
- Find out who you really are; be your authentic self
- Defeat your fear
- Tear down the fourth wall; develop a relationship with your audience
During the panel discussion moderated by prior Deal Ring winner Jason Kliewer, Partner & CIO of Trumark Companies, the four Ringmasters shared timely insights, asset allocation criteria and capital raising advice prior to judging the managers. The Ringmasters addressed Jason’s questions including: What are the allocators looking for? What role does relationship play? Is there a courtship process? What is an appealing level of confidence? Does gut play a role in decision-making?
Here is what they had to say:
Joe Marren, President & CEO, KStone Partners
KStone focuses on niche, credit-related arbitrage and relative value strategies. Joe weighs background heavily and considers manager’s information advantage as critical. “We view an emerging manager as someone who used to do the same type of portfolio management at his/her prior firm and is now seeking capital on their own. We are not seed investors but will watch for approx. 15-18 months prior to making a commitment.” He also noted that his gut feeling during an initial meeting does play a role in the relationship development process.
Joe’s advice to managers: “Articulate how you have an information advantage in a specific relevant space and how that translates into your performance edge.”
Tom Zucosky, Partner & CIO, Discovery Capital
Discovery Capital is an equities-centric, multi-strategy hedge fund, investing via separately managed accounts in liquid strategies. Tom prioritizes a manager’s in-person ability to convey a solid story and repeatable investment process. Tom acknowledged relying somewhat on gut and many years in this business as he noted, “You will know within around fifteen minutes whether to move forward to another meeting.” Bombarded with almost constant manager communication, he attested to receiving around 500 emails a day but will meet with just a couple names. He said, “my priorities are strategy as top criteria, then track record, then the quality of the pitch.”
Tom’s advice to managers: “Focus on your strategy as this area must be explained clearly, concisely and reflect continuity of experience with longevity in your specific niche or investment space.”
Don Motschwiller, CEO, First New York Investment Advisors
First New York invests across a broad range of liquid strategies with approx. 30-40 managers and provides acceleration capital. For the initial meeting, “I prefer not to include the portfolio manager, instead relying on the marketing personnel. I generally get a gut feeling and determine within the first fifteen minutes whether or not to continue the discussion. In advance, I expect to review the marketing materials and numbers, prioritizing risk-adjusted returns. Performance drives the decision.”
Don’s advice to managers: “It is important to exude a level of trust. You must be able to articulate a cohesive strategy – very succinctly.”
Larry Newhook, President & CEO, Alpha Innovations
The multi-strategy platform Alpha Innovations was launched in 2018 following Larry’s managing the team responsible for managing the external investments and vetting all internal PM talent for SAC Capital/Point 72 for 12 years. His view of the relationship process with managers begins with receipt of a tear sheet before deciding on whether to take a meeting. “My initial questions are: ‘Do the numbers appear to exhibit alpha?’ and ‘What is your pedigree – who did you learn from?’ as the story must be compelling to interest me further.” “ I need to understand how the manager creates alpha”. Larry seldom reads marketing pitch decks and rather gains his insights into how alpha is generated from conducting deep dives into the managers’ portfolio – position by position and via exhaustive reference calls. Larry’s advice to managers: “Be prepared to articulate your process concisely and walk through your portfolio to demonstrate how you use your process. If you don’t have a defined process, you will have a hard time convincing investors that you can generate persistent alpha.”