Start-up hedge fund managers should deliver double-digit returns in first year

2016 Opalesque Investor Roundtable

(LEFT TO RIGHT ) Greg de Spoelberch, Chris Solarz, Rob Kaplan, Peter Tarrant, Steve Simmons, Corey McLaughlin, Larry Morgentha

The best advice for start up hedge fund managers is that they should be able to deliver double digit returns in their first year of operation, said Chris Solarz, managing director at alternative investment consulting firm Cliffwater LLC during the 2016 Opalesque Investor Roundtable.

Solarzadded, "Performance stands alone as the single, top priority. You need to perform in year one, it is as simple as that. Marketing and business building can wait for a few years because it won't be possible without a solid track record to pique allocators' interest."

Rob Kaplan, senior managing director at the $26bn global funds of funds EnTrustPermal believes start-up managers should focus on hiring a president or a CEO-level professional, who can talk intelligently with clients about the book and understands the complexities of the regulatory environment. A manager who is just starting out needs a dedicated professional to run the business, because a manager's time is best served by focusing on the portfolio, he said.

"This person should not be one of your analysts, but should be a dedicated, experienced partner. I frequently tell managers to take that step, but there is a psychological challenge for many managers who do not want to accept that reality, because they want to have full control in running their own business. A manager has to realise that they have limited brain capacity and time to dedicate to operations," Kaplan said.

Funds with delegation challenges

Kaplan added that managers who are wary of giving up an ownership ......................

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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.