The attraction of emerging managers
Interview with Jack Seibald (pictured), Concept Capital – Last year, the majority of the USD70billion in net new inflows went to the biggest well-established managers. And despite industry assets this year climbing USD183billion to USD2.19trillion, through Q3 only USD31billion represent net inflows, suggesting that capital raising, particularly for smaller and emerging managers, remains as hard as ever.
To try and improve the efficacy of fund raising for such managers, Concept Capital have this year pushed on in their capital introduction efforts, expanding the team and hosting more regular investment meetings. As the firm’s managing member, Jack Seibald, explains: “Mid-way through the year we started hosting investment meetings. That effort has been well received both on the part of allocators to whom we’ve introduced a select number of managers, and of course the managers as it has given them the opportunity to meet with a several dozen allocators at a time.”
Since the summer Concept Capital has hosted three such events, with plans to schedule them on a more frequent basis in 2013. One of the spin-offs of this approach has been the production of an asset allocator survey, which is due to be published in the coming weeks. The survey reached out to a diverse range of investors more inclined to allocate to small and emerging managers – who represent the majority of Concept Capital’s prime brokerage clients – and included family offices, FoHFs, wealth managers and HNW individuals with a combined investment of USD150billion in hedge funds.
“This survey was designed to provide some value-add to our clients and provide them with market research that may be helpful to them in the capital raising arena in the New Year. The survey dovetails with the strategy of having more regular communications with hedge fund allocators, so as to provide a better, more coherent way to guide our capital introduction process,” explains Seibald.
“The first meaningful statistic in this report is that well over three quarters of respondents expect to increase their allocations to hedge funds in 2013.
“Moreover, more than three-quarters of respondents said they were significantly interested in emerging managers, specifically those with an equity bent. That included global equities, US equities, emerging market equities. As a category, long/short equities seemed to elicit a strong response,” confirms Seibald.
With yields at artificially suppressed levels and interests rates having remained low, fixed income strategies have excelled this year. It is possible, from this survey that allocators think that the fixed income markets have peaked, and are gearing up to rotate back into riskier assets next year.
“We broke the survey down into a variety of categories but the ones that shot to the type, in terms of favoured strategies, were global and US long/short equity strategies.
“There appears to be an opportunity for emerging managers to gain assets in 2013 assuming they have a good story to tell and a solid track record of performance and volatility to demonstrate. If you’re a long/short equity fund manager you should be particularly encouraged by the results of our survey as there seems to be a ready audience willing to look at your strategy.”
Among the reasons for this increased interest in emerging managers demonstrated by the survey may be that many allocators already have representation with larger managers and are now looking for some “incremental alpha generation from emerging managers”, speculates Seibald.
To read Concept Capital’s hedge fund allocator survey and find out further details, please click here
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