There is not a day goes by where capital raising not far from the start up manager mind. It doesn’t matter if you have the best strategy profile, performance, risk management, raising money in this competitive environment has never been so difficult.
In times when Hedge funds face a net outflow close to $60bln during 2016 alone, losses and exorbitant fees are compelling investors to take out more money than they put in.
The truth is, no one is waiting for you with capital ready to invest. Many times I hear the terms capital intro and third time marketers. Capital introduction is a service usually provided by fund of funds & prime brokers. Today if you are working as a prime broker I assume 2 things will be important for you before you can introduce clients to hedge fund: Amount of business you are doing with the prime broker and your performance. Unfortunately if you are a small to medium fund using one of the biggest prime brokers out there, the chances that you will get any capital are quite slim. As the focus will be on the bigger funds that must be doing more business with the prime brokerage firm to be able for the firm to afford their employees time, and risk.
Third time marketers, for hedge funds are FINRA licensed individuals and firms that raise capital for multiple hedge fund products. Third party marketers, similar to capital introduction teams, will set up investor meetings, conference calls and road shows. Unlike capital introduction however, where the representative simply makes an introduction, third party marketers usually help to close the client down. What I mean by this is, third party marketers will not only get the client interested initially, they will also follow up with feedback after conference calls and manager meetings, update the client with monthly returns.
Still, there are many great undiscovered managers and traders with great product that need the right "platform" to help develop their strategy, putting in the right structure and sell to investors not just through capital intro teams and third time marketers. Not only portfolio managers from large hedge funds and banks, but also managers who are usually just starting their first steps in the field, who were before self-traders, prop traders or just managed some accounts for family and friends.
We all know that there are great platforms out there that will help you set up the right structure, will provide you all the necessary tools (risk management, operation) but what's next for the manager growth? We believe that you need to surround yourself by a team that will do everything in their power to help you grow your fund, help you set the right investment process for investors, risk management, marketing material, team that will put you in front of investors that fit your product. Falcon wants to make sure that the manager will succeed with our support all the way through.
Every new manager knows that the best way to raise capital at the start is to focus in your contacts and start from there before thinking even to go out and sell your fund. We believe, that with many investors you will get only once chance, why to waste it in such early stages. Get the first capital from your friends, family, and colleagues. I can assure you, the potential of money raising within your contacts is massive. For us at Falcon, it took us 2 years to really understand what we want to sell to investors and our contacts with products that will fit their risk appetite.
At Falcon, besides helping you build the right structure and market it correctly we will allocate you a marketer that is job will be to learn your strategy, build the marketing material around it and to put you in front of different investors. It will not happen from day one as you start the fund, but as you move along and create a bit of track record then Falcon will do it best to help you grow your fund within our offering, contacts and external investors.
One of the managers I met lately took me through his strategy that has more than $40mln from friends and family. In the last 2 years he had double digit return and the right risk management , but he felt quite disappointed not being able to grow the funds at all from external investors. We Realized that once he outlined the fund domicile and the fact that he used inexperienced marketers that couldn't bring him anything after 2 years, those were the main reasons why he couldn't grow his fund.
To sum up, I believe when making a decision which approach you will choose to start your fund you should think who really can help you grow with your product, experience and background.
Falcon is a London-based multi-strategy investment manager, focused mainly in highly liquid global macro investment vehicles. Falcon targets investments on an opportunistic basis and includes four core investment funds: Long/Short Equity , Fixed Income , FX spot and Future Indices Quantitative Strategies . Falcon's team consists of experienced managers and teams, deploying diverse set of strategy sets designed to extract value from market inefficiencies. From discretionary to systematic strategies , liquidity is a key driver in our funds. Falcon determines the concentration in, and allocation to our investment strategies. The Firm is positioned to selectively add to or reduce its allocation to particular investment strategies on short notice given the opportunity set prevailing from time to time. Our clients are HNWI, Family offices and wealth management companies. We currently have committed capital close of $100mln across our different funds.
The Material is for distribution to Professional clients and should not be relied by any other persons. The information contained herein does not constitute an offer to sell or the solicitation of any offer to purchase interests in Falcon Funds (the “Fund”). Any such offer or solicitation may only be made through the Fund’s offering and governing documents.