- How is the fund evaluated?
Different asset allocators may have different approach. While all of them want to know about the fund performance, it’s not necessarily the deal maker/breaker. Some review the investment strategies and their implementation to see if the performance is sustainable and repeatable; some want to know whether such strategies are scalable; some evaluate the managers based on their background and appetite for risks; and some like certain strategies more than others…
In brief, there’re four key aspects the asset allocators examine: 1. strategic management (fit for purpose); 2. human resources (managers and their background); 3. investment program (for example: whether it’s repeatable); 4. risk and performance management.
- What’s the impact of the economy to the selection process?
One, transparency has become more important than ever . The fund manager needs to realize that although he/she is managing the fund, “it’s not your money, it’s your client’s money”. Two, if your performance was hurt during the downturn, you want to be able to answer two questions: 1. What caused the bad performance; 2. Chances of it happens again. Three, gating provision in the offering documents is being reviewed carefully. It’s perceived as ridiculous if it’s a fund with macro strategies, but could be sensible for some funds that cannot afford fire-sale of their portfolios. Four, well, surprise surprise, it takes longer than before for asset allocators to recommend any fund to their clients, as mentioned earlier, expect 1-2 years.
- What fund managers can do to expedite the process
Communicate in a clear and concise fashion. If you pitch through emails, put information in the body of email, or better yet, in the subject line. Don’t ask the allocators to refer to an attachment that mostly will never be opened.
Go to online database for the investors and upload your fund performance.
Networking. Get on the capital introduction team’s email list, go to conferences/seminars, get in front of asset allocators directly instead of through another third person’s introduction.
This is a lot of work. If you work in the west coast, it feels even more so since you probably start your day at 6:30am. I feel your pains as a fellow entrepreneur, but I also know the joy and excitement being your own boss and owning up all the wins and losses. Reach out to your local professional associations and community for alliance and supports. Throughout the year, CFA SF Society holds several career development sessions on starting your own fund; SF Small Business Bureau provides lots of free useful classes in the city (its annual SF Small Business Week is approaching soon this May); in the states, you also enjoy a community of service providers that will give you professional services at a price that will preserve your fund performance.
I started Affinity Fund Services LLC to fill your need of a high quality fund administrator. We also speak to the leading investment professionals serving hedge funds, and understand their background, services and specialities. Check out our webpage service providers to save time, inconvenience and effort to find the right service providers for your fund. Focus on what you are good at and what investors pay you for, investments; let us work on what we are good at, fund accounting.
Want to learn more about fund raising? Read our other blog article: ten tips to raise funds for hedge fund start-ups
