The following is an excerpt from a recently written White Paper on the basics of fund marketing.
The primary marketing challenge for the alternative investments industry is finding the sales and marketing expertise required to realize capital inflows. Compounding this issue is the SEC and FINRA regulatory landscape: it is morphing at a time when institutional alternative investors are re-evaluating investment strategies and reshuffling portfolios. These dynamics require fund managers to review and recalibrate their sales and marketing strategies and tactics.
The three main questions on fund managers’ minds are:
• What is the current fundraising environment?
• How are firms raising capital and rebuilding their investor base?
• What must firms do to prepare and execute successful fundraising campaigns?
Fundraising is not a one-time event. In fact, it must be an integral and ongoing part of every firm’s business strategy to validate a fund’s model, and to ensure profitability and growth. Practically speaking, fundraising ebbs and flows at most firms, but it should never be far from your firm’s collective conscience.
Thousands of hedge fund managers are currently seeking allocations; yet, many do not know what it takes to execute a sales and marketing campaign. The quest for raising capital from alternative investors comes under the umbrella of sales and marketing, and like it or not, sales and marketing are professional jobs that take years to learn and perfect.
The Fundraising Environment
Back in the days of yore, a high-flying manager could be discovered by investors. And if the manager had the right performance numbers and a compelling story, investors would make an allocation. The whole due diligence process was often completed in a relatively small amount of time, typically three to six months. This was passive fundraising. The investor relations staff had only to answer the phone to raise capital.
Active fundraising didn’t require much more effort. Times were good. When managers wanted to raise capital, they could call upon their stable of investors and ask them to increase their commitments.
Those days are long gone. The paradigm has shifted. No longer are investors coming in over the transom, and the financial crisis caused many stalwart, dependable investors to leave funds. Today, managers looking to raise capital must “go outbound” and find investors that are a good fit for their strategies.
To read the rest of Marketing Your Fund: A Primer, please click here.
