Hedge funds can do a lot of things to raise more capital, but the best strategy might have more to do with communication than anything else.
“The way they can attract more capital is by telling a good story and making sure that they’re succinct in their message about what they’re doing with the capital they’re investing,” Daniel Strachman, a financial expert who serves as the Director of Research and Strategy for the GAIM Conference Series, told StreetID. “Number two, proving that what they say they’re doing is what they actually are doing, and meeting the expectations of their investors.
“Number three, it’s a communication issue — letting your investors know when you’re doing well, letting your investors know when you’re not doing well, and then reaching out to additional investors.”
Strachman, who authored nine books (including Getting Started In Hedge Funds and The Fundamentals of Hedge Fund Management), has managed money and helped build hedge funds all over the world.
“One of the things that I think most people fail to recognize is that they have this field of dreams scenario — an ‘if we build it, they’ll come’ kind of thing,” he continued. “That’s not true. The way to be successful in the hedge fund industry is to go out, come up with your story, your marketing message, make sure it’s succinct, make sure it’s accurate, make sure it explains in detail how the money is being managed, and then communicate that to existing and potential investors on a regular basis.”
Strachman said that the number-one thing that most managers forget is that it is the client’s assets they are handling. “Clients have a right to know what’s going on with their money,” he said. “That’s what they have to remember at all times. So if a client calls and asks what’s happening, they need to be willing to talk to them and be willing to explain what’s going right, what’s going wrong, and just have open dialogue.”
While the occasional bad apple is inevitable, many within the hedge fund industry are getting it right. “A lot of the big or medium-sized funds are growing and they are adding people,” said Strachman. “I know some small groups that are adding people as well. [Hedge funds] are always looking for marketers to help raise assets and increase assets under management. I think that’s where there’s always room for good people.”
Strachman also believes that they are seeking help in compliance and operations. “I think there’s opportunity on the asset management and the portfolio management side as well,” he added.
But don’t count out the technologists, who have become an important part of the financial sector. “I think there’s always going to be room for fundamentalists and quantitative managers in the marketplace,” said Strachman. “I think a lot of times you’ll see that there are [hedge funds] out there who are looking for good people — they just want people.”
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