By: Robinson Crothers
Emerging hedge fund managers who are unable to articulate the benefits of their approach in a clear and concise manner typically find it hard to gain momentum with investors. This is true even for managers with strong credentials and a compelling strategy. The primary means managers use to convey information to investors is their fund's marketing materials. Investors in the emerging hedge fund space are particularly discerning, often carefully evaluating hundreds of funds annually and reviewing thousands of pages of collateral in the process. As a result, emerging managers determined to achieve their full potential should spend the time and resources necessary to develop a compelling presentation that's comprehensive yet succinct.
BHA analysts are in contact with investors in the emerging manager space on a daily basis. Overwhelmingly, these investors rank a fund's marketing materials high on their list of considerations. Many comment that strong marketing materials are important because they indicate a fund's level of professionalism and organization. Often, the mere fact that a manager is able to put together clear, concise, and informative collateral is enough to differentiate the firm in the crowded fundraising space.
A tear sheet is one of the first opportunities managers have to put their best foot forward. These short, often one-page presentations offer potential investors a glimpse into an emerging hedge fund. In addition to conveying the fund's story and investment strategy, tear sheets should touch on the important facts about a fund's structure and organization, including the amount of assets under management, the fund's domicile, its prime broker, and the redemption provisions. When prepared correctly, a tear sheet should help an investor quickly decide if a fund is a strong fit or not, ultimately saving time for both the investor and the manager.
A far more in-depth and encompassing marketing effort must be made in the fund's pitch book. In an attempt to show off the pedigree of the management team and to touch on all the fund's attributes and strengths, many emerging managers make the mistake of putting too much in the pitch book. Although a fund's pitch book should be highly informative and answer investors' potential questions, it is vital that this material be presented in a concise and easy-to-access format. The ability to balance these two seemingly conflicting requirements is one of the most important determinants of the efficacy of a fund's marketing effort.
Investors interviewed by BHA analysts regularly indicate that the single most important factor regarding an emerging hedge fund's marketing material is consistency. It is imperative that all of a fund's collateral-the tear sheet, pitch book, and website-convey the exact same message. Investors cite this not only because consistency is vital to having a clear and accurate understanding of an emerging fund but also because it is demonstrative of an organized and professional fund-exactly the type of fund to which investors are willing to allocate capital.