For a hedge fund, attracting investors early on and as the fund seeks to grow is crucial to success. Without a strong and growing base of assets, a hedge fund may have challenges fully and successfully executing its investment strategies. Institutional investors and their consultants continue to show interest in hedge funds and thus represent a huge opportunity for new hedge funds to grow their AUM. But what are the best ways to attract these investors and consultants?
One way is by ensuring industry databases like eVestment are updated with as much data as possible from a hedge fund’s inception and going forward because increasingly big institutional investors are using databases to search for managers to whom they will consider awarding investment mandates.
eVestment’s clients are institutional investment consultants and institutional investors – like pension funds, insurance companies, foundations, endowments and sovereign wealth funds — and the asset and hedge fund managers that invest money on their behalf. On the traditional, long-only side, asset managers have long shared a wide variety of data with eVestment to ensure their products are visible to consultants and investors when they look to award new investment mandates. As institutional investors and their consultants have become more interested in hedge funds, they are seeking similar levels of transparency and data as they search for hedge funds to consider investing with. So for a new fund looking to attract investors – and institutional investors have billions to invest – being in a database like eVestment is crucial to asset raising success.
Investors are increasingly looking for more than just returns when they search for hedge funds, which can be a plus for the hedge funds that are starting out and may not have a very strong returns story right out of the gate. Of course returns are and will always be an important part of the story. But investors, when they are searching for managers and vehicles with which to invest, are looking for other things as well.
Because institutional investors seek to have balanced portfolios, they are frequently looking for new investments opportunities that compliment or balance their existing investments. So they may be looking for a fund with a specific investment focus, style or geographic focus that is missing from their portfolio. Additionally, many institutional investors have diversity mandates in their investments, so an investor may be looking for a fund that is fully or partially owned by a woman or a member of a minority group. Perhaps there are schools that are known for turning out successful hedge fund managers. Investors may be looking for hedge funds with key professionals who attended those schools. So, as an example, a pension fund may be looking for a hedge fund with X% returns, partially owned by a woman, based in London, with an activist strategy and key professionals that attended a short list of top universities.
If a new hedge fund happens to fit these criteria but isn’t in an industry database – or is in the database but their profile is missing one or more of the criteria the investor is searching for – they simply won’t be found. So for the hedge fund starting out, it’s crucial to create and keep updated profiles in databases like eVestment and to make sure those profiles are updated as completely as possible. eVestment continues to work with hedge funds so they understand the importance of transparency and populating databases as they seek to build their funds and attract new assets.
We continue to add new data fields at the request of our investor and consultant clients who tell us what kind of data they would like to see while they screen and search for fund managers. We have found that over time hedge fund managers have become more interested in transparency as they understand that such transparency is the first step to attracting large mandates from these institutional investors.
By being in an industry database like eVestment, new hedge funds have the ability to be searched for and found by investors. If new funds are not in these databases, these funds are essentially invisible and don’t exist to big investors who increasingly are using databases as their first and sometimes only source for finding new managers and new investment vehicles.
Name: Christophe Frèrebeau,
Director, Head of Europe, Middle East and Asia
Web Address: www.evestment.com
Address: 2nd Floor, 60 Fenchurch Street, London EC3M 4AD,
Telephone: +44 (0) 20 7651 0800