Three steps to success in hedge fund asset raising

How does one get a lead in the extremely competitive environment that is the hedge fund industry - especially funds of under $100m? Don Steinbrugge, a veteran asset raiser and head of US-based marketing firm Agecroft Partners, says it is entirely possible to do so, so long as one follows all of three principles.

It is indeed a lot harder for smaller hedge funds to raise assets, he says during an interview on Opalesque TV , quoting a Preqin study that found that less than 2% of investors' flows go to hedge fund managers with less than $100m in assets. And since most hedge funds are under $100m, "the majority of hedge funds are going after 2% of assets."

"Part of the reason is the make-up of the hedge fund investor has evolved over time," he explains. "From 2000 to 2008, most flows were going from funds of funds, family offices, HNWIs. And since then, pension funds, endowments, foundations, sovereign wealth funds have been dominating the asset flows. And a lot of those investors are looking for larger managers to allocate to." So smaller hedge funds have to work a lot harder to build their brand.

Three factors that will mean success for any hedge fund

"Any hedge fund can be successful at raising assets if they excel at three things," he says. "The first thing they have to have is a superior product. And it has to rank well across each of the factors investors use. One of the big issues is that many hedge funds have no idea how investors select hedge funds; they think it's all about performance. I can tell you it's not all about performance. Performance tends to be a hurdle that you have to be above, and once you're above that specific hurdle, then all these other factors that investo......................

To view our full article please login

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