This year’s hedgeweekLIVE European Emerging Managers Summit concluded with a wide-ranging panel discussion centred on fundraising, with speakers examining some of the ways start-up hedge funds can successfully attract investor money during the challenging capital-raising process.
This year’s hedgeweekLIVE European Emerging Managers Summit concluded with a wide-ranging panel discussion centred on fundraising, with speakers examining some of the ways start-up hedge funds can successfully attract investor money during the challenging capital-raising process.
Moderating the discussion, Fiona Treble, managing director, global head of membership development and sponsor relationships at the Alternative Investment Management Association, asked panelists when hedge fund managers should start to consider expanding beyond their initial friends and family money.
“My approach is scale or fail,” said Anatoly Crachilov, founding partner and CEO of London-based Nickel Digital Asset Management, which manages some USD300 million across four cryptocurrency and digital assets-focused strategies.
“When we came to the market it was three months after we set up the firm,” says Crachilov, who previously managed money at Goldman Sachs. “The idea was that there is no reason to delay launch – you launch with what capital you have, you start building your track record, and then you talk to the allocators.”
He said approaching larger institutional allocators may take a few years, but in the meantime the focus is on building a J-curve. “You target long-term, you build relationships which will crystalise in a couple of years, but for the time being you talk to the family offices who are far more agile and are able to allocate faster than larger investors.”
Emerging hedge funds ultimately need a sizable launch of around USD20 million to be taken seriously by investors, according to Eleri Rhidian, vice president, sales and investor relations at Trium Capital, which runs a range of alternatives and ESG UCITS strategies, and has partnered with a number of proven portfolio managers who have run strategies at high-profile hedge funds including BlueCrest, Millennium, and GLG.
The panel also reflected on what capital introduction functions and third-party marketers bring to the table, and considered some of the ways managers can use service providers to get in front of the right people. Speakers also considered when emerging hedge funds should think about investing in a dedicated staffer focused solely on the fundraising process.
“The number one thing to understand is that no-one is going to do this other than you,” said James Purdie, head of investor relations at Arion Investment Management, who began his career in capital introduction. “It really comes down to whether you are able to form those relationships and tell your story successfully.”
Purdie – whose firm is a commodity-focused hedge fund that launched five years ago, running niche, uncorrelated strategies with just under USD100 million in assets – explained: “There are a lot of competent, very capable traders out there who are very good at what they do, but if you can’t sell that, you will be just sat there forever.”
Rhidian agreed, adding: “The last thing you want is the CIO running around trying to book in meetings. I would definitely invest in a sales team as soon as you can afford to.”
Later, Purdie and Crachilov both spoke about the importance of the media during the start-up phase, suggesting many managers underestimate the power that news articles can offer in terms of building credibility within the broader market.
