I left a multi-billion dollar HF back in 2008. The entire team ending up leaving due to issues with owner (he was not involved in the investment process). Now we are a startup and having problems raising capital. Everyone we speak to (FoF’s, family offices) are either trying to raise assets themselves and have no money or we are too small for them. Our performance is outstanding since our launch (up over 20% last 12 months). Low volatility, stable returns. For you FoF analysts/allocators: What traits are you looking for in a fund? We have been successful in the past and have a niche in our market. Clean record, etc… large team for our assets. We can put on (or sell) a full position with one trade, ie don’t worry about market impact. If anyone is interested would be happy to take conversations offline.
What is your AUM right now? Are you too small for investment In response to the rest of the question, you need to show institutional level infrastructure: reporting/administrators/ability to take direct investments e.g. managed accounts. Maybe you are failing in the opdd stage. Also can’t you find a 3PM to do the marketing work for you?
Are you registered as a CTA?
hi muddahudda. thank you for our reply. just under $20mm. we do have a institutional investor. other is internal and friends. We outsourced the back office to highly reputable firm and even have a CFO/COO that does the check and balances. We developed our own systems to process trades etc, and then hand off to outsourced BO. We are setup to do a managed account and with our previous firm ran 10 managed accounts successfully (most clients said we were “the best” as far as tracking the main fund for their managed accounts). We have an internal marketer and also in touch with 3rd party.
never mind …
maratikus Wrote: ------------------------------------------------------- > Are you registered as a CTA? no we do not trade commodities. we are focused on fixed income. cap structure trades, cv arb, relative value etc…
What is your capacity? You have said you are in a niche market. Can you scale up? As you will have experienced, most institutions can’t allocate to you due to limitations of scale. You need to make them most comfortable on that. Tricky situation. For example, an investor with a $500m fund will likely allocate 10m each to 50 HF managers (most realistically fewer managers and more $$). That would make them a majority investor day one in your fund and these investors like to see other investors (mild version herd mentality). These things are tracked. Your approach might be to try the private bank/HNWI route to build critical mass. The institutional investor is presumably an original / backing investor. What made them invest? Good that you have one. I think if you added one, you would be set for the next level. Also, at your size you need to try access seeding programmes. Given the low success rate of small managers, especially over the last few years, you need to demonstrate something ‘out there’. Yet another place is to get on a hedge fund platform where they take on traders/funds. While I think of it, when you are dealing with the investors, you have to put the main man in front of them. Access/transparency is key. If your main man is not credible/a good story teller, you will make life difficult for yourself. In my experience, the more gravitas the manager has, the more investable they become. I have seen met some of the biggest names. They always control the pace, flow & level of the discussion. Last thing I was wondering is that you mentioned that you had a large team. Your assets probably don’t support a very large team if you are living off 2 & 20. Even this year @ $20m * 2% + $4m * 20%. That 480k bonus has to spread round. How big is the team?
Shoot me an email: my screenname @ gmail.com There’s someone I can put you in touch with that could help with this.
Muddahudda Wrote: ------------------------------------------------------- > Your approach might be to try the private bank/HNWI route to build critical mass. From what I’ve seen this will be difficult - they also have high track record and AUM thresholds.
Muddahudda Wrote: ------------------------------------------------------- > What is your capacity? You have said you are in a > niche market. Can you scale up? As you will have > experienced, most institutions can’t allocate to > you due to limitations of scale. You need to make > them most comfortable on that. Tricky situation. > For example, an investor with a $500m fund will > likely allocate 10m each to 50 HF managers (most > realistically fewer managers and more $$). That > would make them a majority investor day one in > your fund and these investors like to see other > investors (mild version herd mentality). These > things are tracked. Your approach might be to try > the private bank/HNWI route to build critical > mass. The institutional investor is presumably an > original / backing investor. What made them > invest? Good that you have one. I think if you > added one, you would be set for the next level. > Also, at your size you need to try access seeding > programmes. Given the low success rate of small > managers, especially over the last few years, you > need to demonstrate something ‘out there’. Yet > another place is to get on a hedge fund platform > where they take on traders/funds. While I think of > it, when you are dealing with the investors, you > have to put the main man in front of them. > Access/transparency is key. If your main man is > not credible/a good story teller, you will make > life difficult for yourself. In my experience, the > more gravitas the manager has, the more investable > they become. I have seen met some of the biggest > names. They always control the pace, flow & level > of the discussion. > > Last thing I was wondering is that you mentioned > that you had a large team. Your assets probably > don’t support a very large team if you are living > off 2 & 20. Even this year @ $20m * 2% + $4m * > 20%. That 480k bonus has to spread round. How big > is the team? Muddahudda, Everything you just wrote is spot on. Our capacity is up to $1B. Our team is 6. We realize $20mm is small and no one is making any money outside of our internal investments in the fund. Our expense ratio is small. Willing to wait this out. HNW: The problem is we don’t have contacts on private wealth/HNW as we came from multi-billion and most of our old clients were chunky institutions. We are in talks with outside marketer to put us in front of HNW. Main man: we are all experienced in investing/portfolio management. We don’t have a CIO that is final decision maker that has a huge personality. That is what really differentiates us in our investment process. No one is scared to bring up an idea and see it through, and no is afraid to challenge another one’s idea if they think it is flawed. This is the money raising issue in my opinion. For example, we don’t make bold statements like: “Euro will dissolve in 5 years” that sends shockwaves in investor meetings…it’s not our style. Seeder: as said, we are willing to wait. We have been touch with several seeders but frankly, their deals stink. We want to retain ownership and don’t want to give out “free call options” on our business. They are not really willing to make a substantial investment that would really change our “too small to invest” issue.
LPoulin133 Wrote: ------------------------------------------------------- > Shoot me an email: my screenname @ gmail.com > > There’s someone I can put you in touch with that > could help with this. email sent.
You can hire companies that will go out and raise capital for you. You just give them a fee.
CFA Jay, could you pls. elaborate on this? Interested in knowing how this works. (WilSuceed, sorry not trying to hijack the thread)
CFA Jay Wrote: ------------------------------------------------------- > You can hire companies that will go out and raise > capital for you. You just give them a fee. Often the fee is a percentage of fees on AUM gathered on an ongoing basis over some time period. So, it can end up costing a lot in future revenues so you have to be careful how the deal is structured (duh), but if you really need to raise assets and you have the goods a good, well connected market can bring in AUM. What’s your break even AUM roughly and how long can you operate as you are now? I know several 3rd party marketers that hung up the investment game and used their contacts to make a sh!t ton of money. One of them made enough to start a pretty sizable VC/PE shop. I may be able to help you out. If you have a pitchbook or any materials describing the firm/strategy feel free to email them to ljmst63 AT yahoo
Thanks BWYF, good and useful info. I was looking more specifically from the point of view of a start-up company not an AMC (that’s what I am in currently). Are there companies that cater in this area as well? Just wondering.
Thank you all for responses. We will continue to outperform and show these FoF’s they were wrong not to invest. We are in touch with at least 3 outside marketers, in touch with seeders, and continue to internally market our fund. We are speaking with 3-4 endowments, several institutional investors, and some pensions. It’s just getting them to write us a check. Just a matter of time…
interesting that only the big guys are getting money…pretty sure they will all underperform the small - mid size. those big guys are asset gatherers rather then trying to make $$ for their clients. If you want infrastructure invest in $20B fund, if you want return invest in the smaller guys.