Emerging managers should avoid chasing 'institutional unicorns' Bryan K. Johnson

For managers looking to raise a new fund after the crisis, marketing efforts will need to be significantly different, according to delegates at the recent Opalesque Texas Roundtable.

"Most of the smaller managers come to the whole fund-raising and marketing challenge with the wrong orientation. They all start out, I shouldn't say all, but the vast majority start out with "All I have to do is put up numbers and the world is going to be the path to my door,"" says Bryan K. Johnson, of Johnson & Company. He works with emerging managers on marketing efforts and fundraising.

He says going after institutional dollars too early is a waste of resources. "The second biggest mistake that they make is they do what I refer to as chase institutional unicorns. "Because I've got $20 or 30 or 40 million and it's all about performance in my mind, I'm going to approach consultants and institutions and they're going to look at my numbers and fall in love with me and I'm going to get $50 - $100 million tickets and I'll be $500 million before you can shake a stick." That doesn't happen."

Managers need to focus on building a strong business that can pass a due diligence smell test.

Instead, for emerging managers to be successful, they will need to focus on building a strong business that can pass a due diligence smell test. "Due diligence has expanded strategically," Johnson explains. "They're looking at more things. It's expanded tactically. There are more people involved in the discussion, in the analysis, and that leads to temporal expansion, it takes more time."

For a fund to be marketed successfully, managers will need to focus on ......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.