Institutional investment in hedge funds has been intensifying since the end of 2009, with institutions now providing 72 per cent of the industry’s capital, according to Preqin estimates.
With investors monitoring up to 100 funds at any one time, it is essential that hedge fund marketers consider how best to promote their fund in order to access this source of capital.
Preqin’s latest survey of institutional investors, based on responses from 50 institutional investors carried out in May, provides an insight into how fund managers should market their fund to investors.
The median number of fund proposals received each month by an institutional investor is 16.
The number of fund proposals that each investor receives outweighs the number of investments that each investor makes each year by around 60 to one.
Consultants are the most used source to find new fund investments, with 52 per cent of respondents stating they source new managers through their consultants or advisory groups.
Forty eight per cent of investors source new funds following direct interaction with fund sales teams, 42 per cent through networking, conferences and recommendations, 22 per cent through third-party marketers, 20 per cent through CapIntro teams and 20 per cent through databases.
Institutions’ preferred method of communication when receiving marketing materials is via email, with most investors not wishing to be contacted via telephone until they have shown an interest in the vehicle.
Seventy two per cent of investors stated that if a fund was rejected the first time round they would reconsider the same vehicle at a later date as the market climate, as well as the investor’s portfolio objectives, changes with time. Maintaining communication and getting on an investor’s list of monitored funds is therefore key in gaining institutional support in the long term.
Amy Bensted, manager – hedge fund data, Preqin, says: “Institutional investors have invested more heavily in hedge funds over the tail end of 2009 and into 2010 following a difficult fund raising period after the credit crisis. The institutional sector of the hedge fund market has become more important in the wake of the market tumult, as these investors have stuck to the asset class in much greater numbers than the high-net-worth sector. Marketing to institutional investors requires a different approach, and knowledge of an institution’s preferences and how they prefer to source funds is essential in gaining consideration for new vehicles. With investors monitoring anything from ten to over 100 hedge funds, getting a fund on their radar is the first step in gaining institutional capital.”
