And the winner is...

Landing an allocation of capital has become akin to winning a beauty contest, according to Frank Pusateri, co-founder of CTA-Expo. The competition is downright fierce and any small misstep can cause you to lose.

For emerging managers, it's even tougher out there. There's an abundance of good traders and good track records; just look at any trader data base. And, as in a beauty contest, where a contestant has to have qualities beyond beauty, such as a unique skill, a great presence and a winsome personality, emerging managers need to be able to show that they understand and utilise best practices in their business in addition to having a sound trading philosophy and good, consistent performance. Being able to demonstrate this can be the difference between winning and losing.

Bobby Schwartz, co-founder of RCM Alternatives, says that, for them, looking at the institutionalization of a manager - their checks and balances and risk management - is key. Sure, they need great trading, but right after that, he looks at how they run their business and how they do their marketing. He emphasizes that a manager has to utilise credible third-party vendors to attain efficiency and accuracy with core processing so he can rely on the numbers he gets and know that the manager is focused on what he needs to be focused on - trading. As he puts it, "You'd better get it right because if you get it wrong, you're done." RCM tracks hundreds of managers, yet narrows down the possibilities through rigorous due diligence and only allocates to 20-40 managers on an annual basis.

Frank echoes this sentiment. With the expansion of the number of traders in the world, allocators, like judges, are looking for reasons to eliminate traders from their universe of possibilities; to whittle the roster down to the "best of the best". Therefore, a trader has to maximize their opportunity at their first chance because, as he puts it, once you get put i......................

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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.