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Alternative Market Briefing

Other Voices: Agecroft Partners believes Hedge fund branding drives a majority of asset flows

Tuesday, November 01, 2011

By: Don Steinbrugge, Chairman of Agecroft Partners, a global consulting and third party marketing firm for hedge funds:

Since the market correction of 2008, a vast majority of hedge fund net asset flows have gone to a small minority of hedge funds with the strongest brands, marking a change from the pre-2008 environment. A brand is an investor's perception of the overall quality of a hedge fund based on multiple evaluation factors that evolve over time. A high-quality brand takes a long time to develop, but once achieved, it significantly enhances a firm's ability to raise capital and retain assets during a drawdown in performance.

Branding is a critical issue for all hedge funds, because the marketplace has become increasingly competitive. Most agree that there are over 10,000 hedge funds in the market place. Hedge fund investors are inundated with requests for meetings, with some receiving hundreds of phone calls or e-mails per week from investment managers. To filter through the overload of information, investors are turning more and more to a firm's brand when choosing which funds to meet and ultimately invest with.

From the 4th quarter of 2008 through the 3rd quarter of 2010, most hedge fund inflows gravitated to the largest hedge funds with assets greater than $5 billion, deep operational infrastructure, large investment teams and an institutional client base. Performance became a secondary consideration. During this period a large ......................

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