Raising Capital

Raising Capital

Raising Capital - Clues for Success

Raising CapitalA recent article in the Investment Management Weekly discussed what hedge funds need to do to continue raising capital from institutional investors. The general view of the whitepaper they produced suggested that hedge funds will need to continue to adapt their business models and approach to communicating their investment process to the interests and concern of institutional investors if their strong growth in raising capital is to continue. Paul Schaeffer, the managing directory of strategy and innovation for SEI was quoted as saying, “The hedge fund industry must recognize that the large institutions have a distinct set of demands concerning issues such as the quality of infrastructure, transparency and risk.”

Some of the stated differences in raising capital from institutional investors instead of high net worth investors
included:
  • More attention is sometimes initially paid to strategy offered than the individual hedge fund managers
  • Longer hedge fund due diligenceprocesses and investment horizon
  • More heavy utilization of outside consultants to help evaluate hedge fund managers
  • Growing concern over hedge fund risk management and “headline risk”
  • Strong preferences for transparency of the hedge funds investment process and tools applied to it
  • More likely to invest in $100M+ or $500M+ hedge funds vs. smaller boutique shops

I think the most interesting part of this article was the fact that it reported that over 85% of those interviewed said they would not invest in a strategy that they don’t full understand, and 80% said it was critical for managers to focus on the fund’s original strategies.

Interested in hedge fund marketing? Read dozens of more hedge fund marketing & sales articles along with details on third party marketing within the Hedge Fund Marketing Guide.

- Richard

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