PARTNER CONTENT

By Kelly Schroeder Managing Director and Head of Capital Introduction, Jones Trading

Raising capital is hard. For many emerging managers, namely the majority that are not spinning out from those marquee names, it’s the hardest thing they’ll do. Emerging managers usually have a short track record, limited assets under management, and a business that is still getting its feet under it.  Finding ways to extend what are already constrained resources to secure elusive early-stage funding is a challenge for most if not all emerging managers.

According to a Reuters report in early 2023, citing a survey by Agecroft Partners, the top 5% of hedge fund managers were set to take in 80%-90% of investor capital in 2023. With the finite resources previously mentioned, and limited sources of potential capital, how do newer managers most efficiently construct a marketing effort? As someone that has worked with - and been a resource for - many new managers over my 18+ year career, I’ll offer some ways that I have seen many find success with their marketing outreach. I’ll also highlight some ways that you can leverage the professional resources available to you within these efforts.

I have segmented the initial stages of a typical emerging manager's development into three distinct periods to provide a structured framework for the progression of an "emerging manager" and the pertinent marketing strategies applicable at each phase. While not comprehensive, this analysis aims to offer valuable insights into the successful growth strategies employed by others in developing their funds.

Pre-launch to day one:

In the early days of a fund’s development, many managers will focus on securing initial investment capital. Investors at this stage are typically individuals known personally to the manager (“friends and family”) or seeders, which require only a baseline of institutional preparedness. If you are working with a Prime Broker that offers a Cap Intro team, this is a good time to ask for assistance in outreach to the Seed Investor community. There is a subset of investors that like to see managers as early as possible, and utilizing a Capital Introduction team’s network here is a great way to efficiently get to as many of these groups as possible. 

An essential early-stage task involves establishing clarity on the repeatability of your process and alpha generation. It is imperative to articulate how your approach sets you apart and offers a consistent edge to potential investors in a clear and concise manner. You can utilize your Prime Broker’s Cap Intro or Business Consulting team here as well to help you hone/refine your message.  First six months

Once the fund is up and running, the track has been established, and core personnel and systems are in place, it’s time to start focusing on those early institutional investors.  While many institutional investors need to see at least 2-3 years of track record before they can realistically invest, it is still important to put a process in place early here, as many investors will begin tracking a manager well before they are a possible addition to their portfolio. The key word here is process. Below are a few things to keep in mind when building a marketing effort.

1. Develop a Prospective Investor List. You can utilize databases (eVestment, HFR, etc), solicit your current investors, attend industry sponsored events, and network with college alumni and clubs.
2. Assess and prioritize your prospects. By implementing calling campaigns, organizing road shows, seeking out opportunities to showcase expertise in industry publications, etc, you are able to slowly access the Institutional Investor world more deeply. From here, managers can appropriately tier investors based on their intent level and ability to allocate capital.
3. Create and implement a systematic process to effectively follow up with prospects. You can achieve this through sales and communication activities, monthly and quarterly distribution lists, and visibility at industry-wide events.
4. **One final note on these early investor conversations. Make sure everyone on your team can clearly articulate your key messages. If an investor speaks with four different people at your firm, ensure they are hearing four consistent explanations of the fund. 

First three years

Once your business has been established, the track record has a healthy start, and your marketing process has been implemented, you have the foundation for building your pipeline of investors and converting these prospective LPs into clients. Below are some activities that successful funds engage in as they continue to grow their firm: 

1. Thought Leadership and Content Marketing: Establish the fund manager as a thought leader in the industry by producing high-quality research reports, white papers, and articles on relevant topics. Leverage social media, blogs, webinars, and speaking engagements to share insights and attract attention to the fund. 
2. Always be working to expand your network: You can do this by engaging in strategic partnerships with industry service providers, investment consultants, Prime Brokers Capital Introduction teams, and fund administrators to enhance your visibility, credibility, and operational efficiency. You should also seek out industry conferences, seminars, and networking events to expand your professional network.
3. Utilize platforms like LinkedIn to connect with relevant individuals and share updates about the fund. 
4. Leverage existing investor relationships to generate referrals and testimonials. Positive word-of-mouth recommendations and endorsements are often the single most useful tool in a funds marketing toolkit. 
5. Treat everyone you come across as a potential advocate for you. This industry is large, but also small. You never know when a relationship will be the connection needed for that crucial investment.

Kelly Schroeder, Managing Director and Head of Capital Introduction, Jones Trading – Kelly has over 18 years of experience. Prior to joining Jones Trading in October 2023, she spent over eight years as a member of the Wells Fargo Capital Introduction team, working with hedge fund investors and managers on the East Coast, as well as the Mid Atlantic and Southeast regions. Before Wells Fargo, Kelly instituted and led a Capital Networking initiative for Trading Technologies (TT) focusing on CTA and Global Macro strategies. Kelly earned a BA in Supply Chain Management from Michigan State University.