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How to attract institutional support for hedge funds: Preqin survey

Wednesday, June 16, 2010
Opalesque Industry Update – Preqin survey results provide insight into how institutional investors assess new funds

Institutional investment in hedge funds has been intensifying since the end of 2009, with institutions now providing 72% of the industry’s capital according to Preqin estimates. With investors monitoring up to 100 funds at any one time, it is essential that hedge fund marketers consider how best to promote their fund in order to access this vital source of capital. Preqin’s latest survey of institutional investors, based on responses from 50 institutional investors carried out in May, provides an insight into how fund managers should market their fund to investors.

Key findings include:
• The median number of fund proposals received each month by an institutional investor is 16.

• The number of fund proposals that each investor receives outweighs the number of investments that each investor makes each year by around 60 to 1.

• Consultants are the most utilized source to find new fund investments, with 52% of respondents stating they source new managers through their consultants or advisory groups.

• 48% of investors source new funds following direct interaction with fund sales teams, 42% through networking, conferences and recommendations, 22% through third-party marketers, 20% through CapIntro teams and 20% through databases.

• Institutions’ preferred method of communication when receiving marketing materials is via email, with most investors not wishing to be contacted via telephone until they have shown an interest in the vehicle.

• 72% of investors stated that if a fund was rejected the first time round they would reconsider the same vehicle at a later date as the market climate, as well as the investor’s portfolio objectives, changes with time. Maintaining communication and getting on an investor’s list of monitored funds is therefore key in gaining institutional support in the long term.

The survey included private and public sector pension funds, endowment plans, family offices, foundations and funds of funds and encompassed a large geographic cross-section, with investors based in Europe, North America and Asia.

Comment:
“Institutional investors have invested more heavily in hedge funds over the tail end of 2009 and into 2010 following a difficult fund raising period after the credit crisis. The institutional sector of the hedge fund market has become more important in the wake of the market tumult, as these investors have stuck to the asset class in much greater numbers than the high-net-worth sector.

"Marketing to institutional investors requires a different approach, and knowledge of an institution’s preferences and how they prefer to source funds is essential in gaining consideration for new vehicles. With investors monitoring anything from 10 to over 100 hedge funds, getting a fund on their radar is the first step in gaining institutional capital. Consultants are important to many institutional investors – by forming relationships with consultants or other advisory groups a hedge fund manager can be promoted to a variety of institutions. Direct marketing of funds is also welcomed by institutional investors, with most preferring to be emailed a pitch book or other promotional materials as the first point of contact.” Amy Bensted, Manager - Hedge Fund Data, Preqin

Download the report from Opalesque: Source


About Preqin:
Preqin is the leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. Preqin has built a reputation in the alternative assets industry for providing the most comprehensive and extensive information possible. Leading alternative assets professionals from around the world rely on Preqin’s services daily, and its data and statistics are regularly quoted by the financial press. For more information, please visit: www.preqin.com


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