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Attracting Hedge Fund Investors

hedge fund investorsI recently received this email...

Richard, I am involved in the management of a new hedge fund that we started last year. Our hedge fund's strategy is a combination of stock and derivatives. Our goal is 30%+ growth per year, and thus far, we are right on track. What I wanted to ask you is this: Are these types of earnings competitive within the hedge fund world? If we continue with this kind of performance, would this type of growth be attractive to third party marketers?

John, If you could sustain 20%+ returns over 5,7 and 10 years and show positive growth during quarters of negative equity market performance it will help. The incentives in the hedge fund world favor those that are long-term greedy not quarter-to-quarter or year-by-year short term greedy. The trick is consistency. It is better to have a 28% returns for 10 years than 100% returns for 3. You will be attractive to many groups, including some third party marketing firms if you have a deeply experienced team, understandable and repeatable investment process, solid returns, good portfolio risk controls and a sound business behind all of this. A recent report showed that institutional investors look very closely at the risk management controls in place for both the portfolios being managed and the hedge fund business itself.

Here is a direct link to the article mentioned above: Institutional Hedge Fund Marketing

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