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Not Raising Capital Fast Enough?

Tyra Jeffries
Tyra Jeffries
Tyra JeffriesFounder + CEO of CreativeCap Advisors

Thinking about launching a hedge fund or looking to grow your fund's assets faster? Find out why some funds raise capital faster than others. Note: Content is targeted to hedge funds, but the information is applicable to other types of asset managers.

Not Raising Capital Fast Enough?

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According to a survey performed by Advent, 67% of investors make the
decision on whether or not to allocate in less than 30 minutes in meeting
with managers —­ 18% of the surveyed investors said that they make a
decision in less than 10 minutes.
NOT RAISING CAPITAL
FAST ENOUGH?
Studies show that it could be your product,
your pitch or both
As you set up your flagship fund or plan to launch a second or third one, a track record is paramount
to validating key areas such as, but not limited to: your approach, your thesis, your value and your risk
management capabilities. While having a track record is important to capturing investors’ attention, if the
product - both portfolio management and operational infrastructure - in the early trading years shows
promise you will notice a strong uptick in investor interest. The ability
to institutionalize your fund and showcase the strength of your product
through its unique value and strong risk management framework are
necessary steps.
However, between now and then what can you do to get more meetings
and close more deals? Take a look at your overall business infrastructure
not just your portfolio management. What are you doing to enhance
your market position aside from targeting stellar returns? A hedge fund is
not just about portfolio management it is above all a business. You
need to spend a considerable amount of time not only building
your operational infrastructure, but simultaneously developing
your story and properly positioning yourself before aggressively
hitting the LP marketplace. Otherwise, it will be a very long capital
raising process.You need to ensure that your product is compelling
and unique enough to attract the attention of investors seeking
out your specific type of strategy.
Getting the attention of a seed or anchor investor is vital to
opening doors up for your fund. However, if you have not taken the time to properly assess your fund’s
marketing edge you will be rapidly burning through your working capital. You should take the time to locate
someone objective to critically assess your fund who is familiar with the landscape and can honestly tell
you the areas where you are lacking. Could it be your product, returns, operational infrastructure, positioning,
investor communication and corresponding level of transparency or something else? Like any business, if you
have a weak product you will not attract investors. The fund’s story and thesis are top reasons why funds
Figure #4: IR Professional Compensation Data
Source: Hendricks & Struggles
“75% of investors say
they all too often see
presentations by managers
who are unable to
clearly differentiate their
strategy.”
	 Source: Advent’s Hedge Fund Investor Survey
Many managers - especially emerging managers - have difficulty raising capital particularly at the beginning
stages of their businesses. The reasons tend to vary, but one of the most commonly noted responses by
managers is surprisingly not working on achieving attractive performance, but rather that their track record
has not reached the three-year mark. However according to AIMA’s and GPP’s recent Emerging Manager
Survey, a staggering 96% of investors surveyed said they would consider allocating to a fund prior to
having a full three years of track record. So why the disconnect? Let’s explore further.
Source: AIMA/GPP Emerging Manager Survey 2017
Prior to allocating to an emerging manager, do you require them
to have in-house personnel for the marketing,
business development and investor relations function?
Before allocating to an emerging manager
- how long of a track record do you need to
evaluate a fund for investment?
Do you [managers] have dedicated in-house
personnel or do you outsource the marketing, IR
and business development function?
79%
10%
11%
Figure #1
90%
10%
Figure #2 Figure #3
44%
20%
32%
4%
2
Dedicated In-House Personnel
Outsourced
Not Applicable Less Than 1 Year
1 Year
Between 1-3 Years
Greater Than 3 Years
Yes No
lose out on meetings with investors. This could also be a reason why you aren’t raising capital fast enough.
Before you decide to solicit to any potential investors, consider strengthening your efforts by formulating
your marketing and investor relations strategy as this is one of the most underutilized action items by
managers. Your marketing is what will sell and package your product as being unique in its added value
and your investor relations strategy is what will keep clients wanting to buy. You cannot have one without
the other. This is why building a strong Marketing and Investor Relations program - even if your assets are
small - is one of the most crucial elements to your success. If you are just a one-man shop get training or
leverage experts to help you improve your strategy.
INVEST FROM THE BEGINNING. This cannot be stressed enough because your partners and relationships
matter in this business. The typical types of partners a fund engages at launch are: fund administrator,
prime broker, auditor, legal counsel and IT specialist. While these are the industry standard partners that
a fund will have, the question remains who is helping you to develop and strengthen your product or in this
case your fund? The single greatest complaint from investors
aside from performance is how managers communicate with
them and the intriguing nature of a manager’s story. Many
areas that managers believe are compelling and unique in fact
is categorized as one of two things: a) commonplace or b)
expressed in a way that appears commonplace.
The reason why you may not be raising capital fast enough is
because the product you are offering isn’t compelling enough
to elicit active and fruitful conversations with investors. The
types of conversations that conclude with an allocation. Investors spend a considerable amount of time
speaking with mangers they have the intent of investing with otherwise it would be a waste time. How much
investor attention have you been getting? Have those progressed into second and third in-person meetings? The
value of having someone objectively review your fund strategy is the difference between spending years
stagnant at a low AUM and surpassing $500 Million in assets. How far do you want to take your business?
Figure #5: What Are The Top Three Mistakes That Funds
Make When Pitching To Prospective Investors?
Source: Advent
HOW DO YOU STACK UP AGAINST YOUR COMPETITORS? REQUEST YOUR SCORECARD.
One of the ways that we help managers is by developing for them a Scorecard. This is a proprietary marketing due
diligence tool that we have developed that allows you and our team to see where you stand against your competitors.
Your Scorecard is the evaluation of your brand after we’ve executed our rigorous research. This tool allows us to
develop strategies and messaging techniques that better follow your brand story. Our research-driven approach has
been created in order to understand the economic value our services can and will bring to our clients. We assess both
your brand and investment profile. We create a brand score that coincides with your current position and focus on
ways to build your firm’s brand equity, a crucial component for business success.
Brand equity is an asset offering commercial value to a company and is derived by the perception the public and all
stakeholders have of its particular products and/or services. It is one of the most critical components of a business
because it is a key driver in LP acquisition, LP retention, recruitment, business development and revenue generation.
Additionally, it has a material effect on your bottom line. For fund managers, it is the difference between being able
to charge higher fees or having to negotiate them down.
3
AUTHOR
Tyra S. Jeffries
Founder & CEO
CreativeCap Advisors
tyra.jeffries@creativecapadvisors.com
www.creativecapadvisors.com (undergoing re-launch)
CreativeCap Advisors is a global business advisory firm with a keen focus on marketing and investor
relations. One of the firm’s flagship offering is outsourced investor relations and marketing solutions. The
firm was founded only in 2015 and has since rapidly expanded and grown to become staples within our
clients’ companies. Our data-driven and high-impact approach to advisory makes us a high value advisor to
each one of our clients, Our team takes a 360° approach to analyzing, creating and developing programs
for our clients. The approach begins by leveraging data intelligence to create the most effective programs,
which has continued to translate into success for every one of our clients. We act as your advisors to help
you build a firm that will continue to make you a compelling investment target to outside investment. Our
varied expertise, breadth of knowledge and exclusive focus on the asset management industry solidifies
our immediate value-add. Our firm has three key divisions - Communications, Investment Advisory &
Research (incl. ODD preparation), Strategic Planning & Business Advisory.
Our team is comprised of 11 professionals - and growing - strategically placed around the world’s key
financial capitals - Chicago, New York City, London and Hong Kong. Our dedicated team is focused on
bringing our clients’ business to the next level. Our firm at the core is a business designed to assist and
integrate with asset management firms by working alongside senior-level executives who are seeking to
further grow and expand their business.
ABOUT THE FIRM
4
Interested in a 15-minute free consultation and business review?
Contact our Founding Principal directly at tyra.jeffries@creativecapadvisors.com.
If you’d like to subscribe please let us know directly what you are interested in and we will
send you targeted complimentary content specific to your goals and interests. If you would
like more information about our firm and services you may contact our Founding Principal
at the e-mail listed above.
Interested in more insights?
Ad

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Not Raising Capital Fast Enough?

  • 1. According to a survey performed by Advent, 67% of investors make the decision on whether or not to allocate in less than 30 minutes in meeting with managers —­ 18% of the surveyed investors said that they make a decision in less than 10 minutes. NOT RAISING CAPITAL FAST ENOUGH? Studies show that it could be your product, your pitch or both
  • 2. As you set up your flagship fund or plan to launch a second or third one, a track record is paramount to validating key areas such as, but not limited to: your approach, your thesis, your value and your risk management capabilities. While having a track record is important to capturing investors’ attention, if the product - both portfolio management and operational infrastructure - in the early trading years shows promise you will notice a strong uptick in investor interest. The ability to institutionalize your fund and showcase the strength of your product through its unique value and strong risk management framework are necessary steps. However, between now and then what can you do to get more meetings and close more deals? Take a look at your overall business infrastructure not just your portfolio management. What are you doing to enhance your market position aside from targeting stellar returns? A hedge fund is not just about portfolio management it is above all a business. You need to spend a considerable amount of time not only building your operational infrastructure, but simultaneously developing your story and properly positioning yourself before aggressively hitting the LP marketplace. Otherwise, it will be a very long capital raising process.You need to ensure that your product is compelling and unique enough to attract the attention of investors seeking out your specific type of strategy. Getting the attention of a seed or anchor investor is vital to opening doors up for your fund. However, if you have not taken the time to properly assess your fund’s marketing edge you will be rapidly burning through your working capital. You should take the time to locate someone objective to critically assess your fund who is familiar with the landscape and can honestly tell you the areas where you are lacking. Could it be your product, returns, operational infrastructure, positioning, investor communication and corresponding level of transparency or something else? Like any business, if you have a weak product you will not attract investors. The fund’s story and thesis are top reasons why funds Figure #4: IR Professional Compensation Data Source: Hendricks & Struggles “75% of investors say they all too often see presentations by managers who are unable to clearly differentiate their strategy.” Source: Advent’s Hedge Fund Investor Survey Many managers - especially emerging managers - have difficulty raising capital particularly at the beginning stages of their businesses. The reasons tend to vary, but one of the most commonly noted responses by managers is surprisingly not working on achieving attractive performance, but rather that their track record has not reached the three-year mark. However according to AIMA’s and GPP’s recent Emerging Manager Survey, a staggering 96% of investors surveyed said they would consider allocating to a fund prior to having a full three years of track record. So why the disconnect? Let’s explore further. Source: AIMA/GPP Emerging Manager Survey 2017 Prior to allocating to an emerging manager, do you require them to have in-house personnel for the marketing, business development and investor relations function? Before allocating to an emerging manager - how long of a track record do you need to evaluate a fund for investment? Do you [managers] have dedicated in-house personnel or do you outsource the marketing, IR and business development function? 79% 10% 11% Figure #1 90% 10% Figure #2 Figure #3 44% 20% 32% 4% 2 Dedicated In-House Personnel Outsourced Not Applicable Less Than 1 Year 1 Year Between 1-3 Years Greater Than 3 Years Yes No
  • 3. lose out on meetings with investors. This could also be a reason why you aren’t raising capital fast enough. Before you decide to solicit to any potential investors, consider strengthening your efforts by formulating your marketing and investor relations strategy as this is one of the most underutilized action items by managers. Your marketing is what will sell and package your product as being unique in its added value and your investor relations strategy is what will keep clients wanting to buy. You cannot have one without the other. This is why building a strong Marketing and Investor Relations program - even if your assets are small - is one of the most crucial elements to your success. If you are just a one-man shop get training or leverage experts to help you improve your strategy. INVEST FROM THE BEGINNING. This cannot be stressed enough because your partners and relationships matter in this business. The typical types of partners a fund engages at launch are: fund administrator, prime broker, auditor, legal counsel and IT specialist. While these are the industry standard partners that a fund will have, the question remains who is helping you to develop and strengthen your product or in this case your fund? The single greatest complaint from investors aside from performance is how managers communicate with them and the intriguing nature of a manager’s story. Many areas that managers believe are compelling and unique in fact is categorized as one of two things: a) commonplace or b) expressed in a way that appears commonplace. The reason why you may not be raising capital fast enough is because the product you are offering isn’t compelling enough to elicit active and fruitful conversations with investors. The types of conversations that conclude with an allocation. Investors spend a considerable amount of time speaking with mangers they have the intent of investing with otherwise it would be a waste time. How much investor attention have you been getting? Have those progressed into second and third in-person meetings? The value of having someone objectively review your fund strategy is the difference between spending years stagnant at a low AUM and surpassing $500 Million in assets. How far do you want to take your business? Figure #5: What Are The Top Three Mistakes That Funds Make When Pitching To Prospective Investors? Source: Advent HOW DO YOU STACK UP AGAINST YOUR COMPETITORS? REQUEST YOUR SCORECARD. One of the ways that we help managers is by developing for them a Scorecard. This is a proprietary marketing due diligence tool that we have developed that allows you and our team to see where you stand against your competitors. Your Scorecard is the evaluation of your brand after we’ve executed our rigorous research. This tool allows us to develop strategies and messaging techniques that better follow your brand story. Our research-driven approach has been created in order to understand the economic value our services can and will bring to our clients. We assess both your brand and investment profile. We create a brand score that coincides with your current position and focus on ways to build your firm’s brand equity, a crucial component for business success. Brand equity is an asset offering commercial value to a company and is derived by the perception the public and all stakeholders have of its particular products and/or services. It is one of the most critical components of a business because it is a key driver in LP acquisition, LP retention, recruitment, business development and revenue generation. Additionally, it has a material effect on your bottom line. For fund managers, it is the difference between being able to charge higher fees or having to negotiate them down. 3
  • 4. AUTHOR Tyra S. Jeffries Founder & CEO CreativeCap Advisors tyra.jeffries@creativecapadvisors.com www.creativecapadvisors.com (undergoing re-launch) CreativeCap Advisors is a global business advisory firm with a keen focus on marketing and investor relations. One of the firm’s flagship offering is outsourced investor relations and marketing solutions. The firm was founded only in 2015 and has since rapidly expanded and grown to become staples within our clients’ companies. Our data-driven and high-impact approach to advisory makes us a high value advisor to each one of our clients, Our team takes a 360° approach to analyzing, creating and developing programs for our clients. The approach begins by leveraging data intelligence to create the most effective programs, which has continued to translate into success for every one of our clients. We act as your advisors to help you build a firm that will continue to make you a compelling investment target to outside investment. Our varied expertise, breadth of knowledge and exclusive focus on the asset management industry solidifies our immediate value-add. Our firm has three key divisions - Communications, Investment Advisory & Research (incl. ODD preparation), Strategic Planning & Business Advisory. Our team is comprised of 11 professionals - and growing - strategically placed around the world’s key financial capitals - Chicago, New York City, London and Hong Kong. Our dedicated team is focused on bringing our clients’ business to the next level. Our firm at the core is a business designed to assist and integrate with asset management firms by working alongside senior-level executives who are seeking to further grow and expand their business. ABOUT THE FIRM 4 Interested in a 15-minute free consultation and business review? Contact our Founding Principal directly at tyra.jeffries@creativecapadvisors.com. If you’d like to subscribe please let us know directly what you are interested in and we will send you targeted complimentary content specific to your goals and interests. If you would like more information about our firm and services you may contact our Founding Principal at the e-mail listed above. Interested in more insights?