New Hedge Fund Launches 2009

Hedge Fund Launches in 2009 is Good News for Next Year

Hedge fund startups are gaining momentum as more new managers enter the market.  Hedge fund launches has significantly increased since the end of 2008 coinciding with a recovery in fund performance in 2009.  In the third quarter, 173 new funds were launched, 54 more than the previous quarter.  The only catch is that many new hedge funds are settling for more investor-friendly terms and lower fees with limited partners and still raising less capital, but that is somewhat predictable after the financial crisis.

Still, the pace of new openings is way down from a few years ago. And “the size of the opening capital base is quite a bit smaller than it has been historically,” said John Willian, global co-head of prime brokerage at Goldman Sachs Group Inc

Among this year’s largest launches is London-based Tony Chedraoui’s Tyrus Capital LLP. His fund launched in mid-October with more than $800 million in assets, which have since grown to about $1.65 billion, according to a person familiar with the matter.

Arvind Raghunathan’s Roc Capital Management LP in New York is managing about $1 billion since launching this summer ((2009)), which at least initially included about $500 million from his former employer Deutsche Bank AG, people familiar with the matter said. And, in one of Asia’s largest launches, Hong Kong-based Nick Taylor’s Senrigan Capital Management Ltd. launched its fund in early November with about $220 million, including about $150 million from Blackstone Group LP, according to people familiar with the situation.  Source

PR for Hedge Funds

Video Below: How to Use Public Relations Services for Hedge Fund Managers

Within this video we briefly cover how hedge fund managers often ignore, but could be employing public relations strategies to help grow their hedge fund business. If you are viewing this article via RSS or email please click here to watch the embedded video below on our website.

Tags: Hedge fund PR, PR tactics for hedge fund managers, free press exposure for hedge funds, alternative investment public relations, PR for investment fund managers

Top 4 Hedge Fund Trends

Below is a short video discussing what I see as the top 4 trends affecting the hedge fund industry.  If you are viewing this message via email or rss please click here to watch the embedded video on our site now.

Incubator Fund Administrator

Do I Need an Administrator During Incubator Fund Period?

Brent Gillett, a partner at the Investment Law Group, has contributed a question and answer guide to launching an incubator hedge fund.  To read the full guide to launching an incubator hedge fund follow this link.

Do I need an administrator during the incubator fund period?

No. Administrators assist in many of the ongoing operations of a full-fledged fund, including processing subscriptions and withdrawal requests, providing net asset value calculations and preparing monthly reports, and calculating fees. Administration fees can range between $500 and $3,000 per month – postponing the need to hire an administrator is another advantage of initially establishing an incubator fund.

To find more information about the Investment Law Group follow this link.

Cost of Incubator Fund

How Much Does It Cost To Create an Incubator Fund?

Brent Gillett, a partner at the Investment Law Group, has contributed a question and answer guide to launching an incubator hedge fund.  To read the full guide to launching an incubator hedge fund follow this link.

How much does it cost to establish an incubator fund?

One of the primary catalysts for the growing popularity of the incubator fund is its cost efficiency. Generally, an incubator fund can be created for $2,500 - $3,500, plus state filing fees to establish the fund and the management company.

To find more information about the Investment Law Group follow this link.

What Information Should I Send To Potential Investors?

Brent Gillett, a partner at the Investment Law Group, has contributed a question and answer guide to launching an incubator hedge fund.  To read the full guide to launching an incubator hedge fund follow this link.

Can I begin gathering indications of interest from potential investors during the incubation phase. If so, what kind of information should I send out?

Yes. Although you cannot market interests in the fund and/or accept capital from outside investors during the incubation period, you can begin gathering indications of interest through your personal network and friends and family (i.e., persons with whom you have a preexisting relationship). Marketing the fund through general advertising or general solicitation is prohibited. In addition, holding yourself out publicly as an investment adviser is also generally prohibited, depending on your state of residence.

To find more information about the Investment Law Group follow this link.

18 Lessons from Shooting Star Hedge Funds

Fast growing hedge funds are unlike most large hedge funds and emerging hedge fund managers. They have figured something out and are positioned to grow unlike 90%+ of the industry.  Here are some lessons which can be taken away from some of the fast growing hedge funds we have worked with:

1. They take transparency serious and work to be pro-actively very transparent - more so than their competition.
2. They approach multiple investment channels but mostly ignore those completely out of their reach (example, potential pension fund clients for a $75M fund).
3. They are always developing relationships and they have dedicated internal and some external professionals always selling on their behalf.
4. They not only pedigree on their team but they are always building that pedigree through additional research, hiring of expert staff, and through speaking & writing.
5. They document their operations and make decisions based on what is best long-term for the organization rather than what is cheaper to implement today.
6. They have risk management and trading plans which are closely followed, this helps them improve their actual trading results and provides confidence to investors since their historical trading actually matches up against the decision making rules of their plans.
7. They know that “risk management” while sounding less sexy than “hedge funds” is the business they are in, and they invest in their own business accordingly.
8. They have documented, tested, and third party verified financial controls, compliance processes and audits completed at least quarterly and these reports are sent to at least board members if not investors
9. They invest and improve their infrastructure every year even if the pay-off for doing so could be 5-7 years away, ironically these are sometimes the investments which pay off the soonest though because investors recognize the type of long-term investments being made
10. They are experts at completing due diligence processes with institutional consultants, family offices and other types of institutional investors.  They have professionals who are trained for phone-based pitches and sales and hand-offs during these processes are seamless.
11. They have just as good of marketing materials as the $1B hedge funds because after investing $300,000+ in infrastructure, talent, research, and risk management it would be a waste not to spend $20,000 on presenting it in the right light in a professional manner.
12. They have seen the light that investing in the right areas does produce returns so they re-invest their money even faster and often more efficiently than even small hedge funds on a tight budget
13. They invest in training for their employees and board members who they grow more long-term relationships with than many emerging hedge fund managers might.
14. They are not only aware of the competition but they are watching them.  Not in terms of what they are investing in so much as what risk management tools, software, trading tools, and USPs they are employing.
15. While hiring they look for very specific skill sets and a minimum of 7 years of experience in the industry, unless they have a policy of grooming from the ground up.  Most fast growing hedge funds we know though like to hire professionals who can hit the ground running and quickly integrate as part of the team.  They actually have an HR department or at least one person who is head of talent development and HR related activities, something almost all small hedge funds lack.  When they are asked on the phone by institutional consultants if they plan on adding anyone they have a sophisticated intelligent answer instead of the generic, “we may add an analyst within the next 3 quarters.”
16. They understand the “trust by verify” mindset of investors and they make it easy to verify everything.
17. They conduct more due diligence on business partners, investors, and potential employees than some retail investors spend on investing in small emerging manager hedge funds.
18. They realize their success is never going to be built on one software program, capital raising process, or investment trend so they constantly are working to build their 1,000 blocks of competitive advantage and ability.

Tags: how to quickly grow a hedge fund, what fast growing hedge funds are doing, hedge fund management best practices, best practices of hedge fund managers, hedge funds

Best Practices of Large Hedge Funds

Below is a bullet point list of some best practices that I have seen $1B+ hedge funds employing that are more often than not missing within small teams of hedge fund professionals.

Giant well run hedge funds often have:

1. Better research processes in place and these are constantly being improved in many ways every quarter. They focus on Kazien - constant improvement
2. Documentation, their compliance processes, operational procedures,compliance checks, internal controls, hiring processes, and risk management techniques are all documented in great detail to help ensure consistent quality and improve what is being carried out
3. International marketing and sales teams which cover institutional investors and consultants in at least Europe and the United States if not also in Australia, South Africa, South America and Asia
4. Deep Pedigree, with larger pocketbooks the largest of hedge funds are able to retain the most experienced experts not only as adjunct advisors to the fund but full time employees or consultants which provide daily or weekly insights on upcoming investment opportunities
5. Human Resources strategies, many small hedge funds do not have any long-term talent development, or  Star Employee hiring practices in place.  Larger hedge funds do and must to keep their organization moving forward and growing over the long-term
6. Master DDQs, every large hedge fund I know of has a very thorough master due diligence questionnaire that is constantly updated.  The larger the hedge fund the more likely it is that their investors will be asking for a very thorough DDQ during the due diligence phase.
7. Superior Marketing, larger hedge funds have moved to the top of the learning curve when it comes to figuring out how to raise capital.  They use multi-modality marketing channels and materials and they have relationship development processes and goals in place which match up with the long-term growth growth goals of the fund.  They are also more than willing to invest in the best graphic designers and sales copy writers who can provide another edge over those who skimp on their image and marketing presence.
8. More In-House Functions, while large hedge funds still use service providers and rely upon business partners many of them have large enough staffs and unique enough processes that some work such as some investment research, operations, accounting, or marketing may be done in-house instead of being outsourced to service providers such as administrators or third party marketers.
9. More Verification Points, the largest of hedge funds have been asked 500 times for their holdings, and 3,000 times for their PowerPoint presentation. They have completed hundreds of due diligence processes and are use to working with consultants who need to check every fact, assertion and claim.  They are use to operating within the world of providing evidence for everything said, and because of this may quickly meet the requests of investors who ask for such evidence.
10. Long-Term Strategies & Goals, most large hedge funds I know of plan for the next 3-5 or 5-7 years strategically in who they hire, market their fund to, and where they open offices.  In contrast most smaller hedge funds are very focused on day-to-day or month-to-month operations and most think in terms of 1-3 year plans.  When investors see the fund planning for, investing in the long haul it shows and that is part of why some larger hedge funds receive more allocations than small ones - they have the infrastructure and mindset more in common with an institutional investor.

Marketing Incubator Hedge Fund

How Long Before I Can Market the Fund to Investors

Brent Gillett, a partner at the Investment Law Group, has contributed a question and answer guide to launching an incubator hedge fund.  To read the full guide to launching an incubator hedge fund follow this link.

How long do I have to operate an incubator fund before marketing the fund to investors?

You can send out performance data to investors at anytime during the fund incubation.  It is our experience that managers typically incubate their funds for a period of 6 to 12 months prior to converting the fund to a full-fledged hedge fund. The longer the track record, the more attractive the investment will appear to prospective investors.

To find more information about the Investment Law Group follow this link.

Bronson Point Partners

Ex-SAC, Pequot Employees Open New Fund

Two employees from different hedge funds plan to combine their experiences to open a new fund, Bronson Point Partners.  Larry Foley worked as a senior portfolio manager at SAC from 1994 until last year and Paul Farrell was a member of Pequot’s executive committee and co-portfolio manager of the firm’s Scout Fund Group.  The two are working together to open Bronson Point Partners next month and are working to attract investors at a time when limited partners seem more hesitant to invest with new funds.  To address this problem, Foley and Farrell have committed $25 million of their own money to show that their skin is in the game.

This is a familiar story this year as more startups are emerging in the wake of a very rough year for hedge funds.  It may be a good time as institutional investors like endowments and pension funds are trying to capitalize on hedge funds’ success this year in order to recoup losses during the financial crisis.  In the past,  proven hedge fund workers such as Foley and Farrell would rarely encounter difficulties raising funds but in a shaky economy investors’ preferences tend to shift to those hedge funds will an extensive track record and who they have invested with previously.

To get into Bronson Point, investors need to put down $1 million, an average figure for most small hedge funds. It will charge a 2 percent annual management fee plus an incentive fee of 17 percent to 20 percent, depending on how long investors agree to leave their money with the new firm.

Bronson Point in its brochure promises to use an “opportunistic approach combining fundamental research and active portfolio management.” The team, which also includes ex-SAC trader Jonathan Marcus, said retailer Bed Bath & Beyond (BBBY.O) and regional sporting goods store Hibbett Sports (HIBB.O) are among the fund’s core holdings.

Foley and Farrell are among a growing number of investment managers who are trying to set up their own firms at a time pension funds and endowments are eager to put money into alternative assets like hedge funds to try and recoup losses during the financial crisis. Former Goldman Sachs star Mark Carhart is also planning to launch his own firm next year.  Source