Managers may be separated only by their presentation skills in today’s competitive environment, and for some, their lifestyle.
Some market participants have long said that starting a hedge fund relies on a three-piece team of talent; the portfolio manager, the administrator, and the marketer.
Whether start-up firms rely on in-house marketing efforts, or the expertise of a third party marketing firm, they may find that sales and presentation skills are the keys to unlocking available institutional capital.
“The first step (to marketing) is making sure the product is real, and articulating the differential advantage,” said Don Steinbrugge, chairman of third-partner marketer, Agecroft Partners. For Steinbrugge, hedge funds should practice their pitching presentations, to make sure they’re “precise, accurate and linear” with little “guessing” in answering questions.
“Sales is a process, and everyone (on the hedge fund team) has to be consistent,” Steinbrugge said, who advises hedge funds to write a preliminary script of their presentation.
Third party marketing firms, which typically take on small to mid sized managers hedge funds growing in size employ their sales expertise to get clients in front of institutions. Similarly to other service providers, reputable third party marketing firms provide “more credibility” in front of institutions, Steinbrugge noted.
While admirable sales and presentation skills can help secure deals for start-up hedge funds, some hedge fund seeders are keen to learn about the nitty-gritty details of hopeful start-up managers.
“The due diligence process we undergo is a long, painful, excruciating process,” said Eric Munson, managing director and partner at Stride Capital, a hedge fund seeding firm. The firm sees between 500 to 800 start-up managers a year.
As a seeder, Munson described that hedge funds that come under his wing are a “partner in a long term situation.”
“We spend tens, if not hundreds of hours going through the portfolio, books, philosophy, process…how you live your life, and how you run your business,” Munson said.
“It’s all the same….how you drive your car, how you treat wait staff at a restaurant—believe it not, it’s a part of how you run your business, and live your life. And it’s going to contribute to whether we decide to allocate capital to you or not.”