Perspectives on Raising Capital

A Different Perspective on Raising Capital: Got the Investor! Now What Happens?

With so much time and energy being invested in raising capital, hedge fund managers fall into the trap of breathing a sigh of relief and rejoice in the vote of confidence being placed in them by their new investor. Tower Fund Services gives some tips on the steps after attaining a new client.

Raising capital isn’t the end of marketing; it’s really the beginning. Fund managers can improve upon communications with investors and prospects by being more than just informational in nature. Client communication gives a fund a recurring opportunity to help investors understand the value the fund is delivering and how the results align with their unique investment needs. This is an area ripe with opportunities for differentiation. A recent survey found that only half of all investors say they fully understand the risk exposure of the hedge funds in which they invest, and one in four say they do not understand it at all.

Investors and prospects want to know how managers create alpha and are different from the pack. Developing communications which pull back the curtain and provide transparency about the business and investment process, gives investors more comfort in their decision. Transparency has been an industry hot spot over the past few years and managers misinterpret this to mean that investors want access to the fund’s portfolio. The availability and openness of a fund manager to discuss concerns and more importantly, views on the market, fulfill most investors’ need for transparency.

Tower Fund Services finds that there is much similarity in the desire that hedge fund managers have to access to the partners of their audit firms and legal counsel to investors’ desire to access portfolio managers. Simply posting performance data on fund reporting databases and sending out monthly one-pagers may not be enough for many investors. To draw a comparison, private equity and venture capital firms gain seats on the board of directors of the companies they invest in to have direct access to company management for evaluating qualitative aspects of the company, in addition to the quantitative data they have access to.

Regardless of how firms package and present fund information, an effective client service model is grounded in listening to clients and probing for a deep understanding of their needs. This holds true not only for fund managers but for all businesses. At Tower, this cornerstone value drives each process and service we deliver to our clients.