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Comment: Emerging managers express confidence but lack financial resources to put their story out to the investor space

Jacques DeRouen, MD of Houston-based Pinnacle Alternative Investments LLC, discusses industry response to the recent launch of its Emerging Manager Investor Database.

Pinnacle Alternative Investments LLC, a marketing and business consultant to emerging hedge fund managers and commodity trading advisors, introduced the EMID (Emerging Manager Investor Database) in March of this year. To date, MD Jacques DeRouen say: 'the response from start-up and early stage managers across all investment styles and strategies has been tremendous. What was not expected, however, was the significant response heard from investors that traditionally focus very little on new and early stage hedge fund trading shops'.

Commenting on the different hedge fund managers that contacted Pinnacle, DeRouen, notes that (as expected) the largest number of inquiries came from long/short, multi-strategy, global macro, CTAs and FX shops (the last, in part, due to Pinnacle's role as principal marketer of FX trading managers).

Other manager strategies included absolute return, opportunistic and event driven models. The majority managed between USD 5 million and USD 25 million dollars and had performance histories ranging between 12-48 months. There was also a fund of hedge fund manager from Los Angeles that showed outstanding promise and came with an impressive asset management background {absolute return focused}.

DeRouen says: 'The overall quality and professional pedigree of the managers that responded was extremely impressive and as a result, we are quite confident that in employing the EMID for their marketing campaign the long term growth prospects of their respective shops seems somewhat assured, all else being equal.'

The common theme from the responses given by inquiring managers was confidence in their ability to deliver upon their performance objectives, though at the same time not having the support, time and in most cases, financial resources with which to put their story out in an effective manner to the investor space.

Most had tried in the past to enlist the services of professional hedge fund marketers, though with little success (traditionally, TPM's focus on middle-stage managers, given their longer track records and more sizeable AUM). Many simply needed affordable resources (in particular, access to targeted investor databases and manager database/platform exposure) in order to leverage their marketing efforts.

A simple and straight forward marketing plan and some initial guidance also would help many launch their marketing efforts. Most had come to the conclusion that in order to reach certain critical AUM levels, presumably to make them more attractive to institutional investors, they would have to develop an organic marketing campaign directed towards more targeted hedge fund investors. Hence their interest in the EMID.

DeRouen says: '…it appears that there are a considerable number of young talented traders in the hedge space that are worthy of a closer look. PerTrac's managing director Meredith Jones' recent research report examining the relative performance attributes of small emerging hedge fund managers, compared to more established managers, clearly supports this contention and industry trends towards emerging manager platforms and fund of emerging hedge fund managers {CalPERS/Altura} reflects a growing recognition of their value add to institutional portfolios.'

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